Review of UK company formations in 2018

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Once again, we’ve performed some in depth number crunching and released our Inform Direct 2019 Review of UK Company Formations.

Built using data from Companies house and the Office of National Statistics, our study forms the most comprehensive analysis of 2018 UK company incorporations and dissolutions.

Alongside the national statistics, we also break down the data for each nation of the UK and individual counties, so you can follow the performance of businesses from Devon to Durham. You’re able to drill down still further, and explore company formation performance in individual districts and even wards across the country.

In this article, we look at what we’ve learnt about the condition of UK business from the annual figures.

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A record year for company formations…

There were 669,855 companies formed in the UK in 2018. That’s up from 634,116 in 2017, and also ahead of the previous record figure of 664,720 in 2016.

That’s great news for UK business – with the number of company formations often seen as a leading indicator for the health of UK business and a measure of confidence among budding entrepreneurs. Overall, our study presents a very positive picture against a background of political and economic uncertainty, showing that the UK continues to provide a supportive environment for enterprise.

It’s a particularly welcome sign that the slowdown signalled in the 2017 figures has not continued. While the prospect of Brexit – in whatever form it takes – continues to hang over parts of the business community, apparently discouraging investment and growth for many businesses, our figures show that a record number of entrepreneurs felt confident enough to form a company to pursue their next business venture.

 

Growth in number of companies across UK 2013-2018

The total number of UK companies continued to climb – now up to an all-time high of 4,308,022. That’s up 4.6% in a year, with the rate of growth in the company population itself up from 4% the year before. Over five years, the number of UK companies in existence is up 30.8%.

… But a concerning number of companies dissolved

The number of companies dissolved still weighs heavily on growth in business numbers. 504,613 UK companies ended their life in 2018, up from 483,800 in 2017. It means that for every 100 UK companies started, 75 were closed. As recently as 2015, only 61 companies were dissolved for every 100 formed – so the figures have worsened.

 

UK companies formed and dissolved in 2018

While there will be natural turnover in the company population – where a company has already served its purpose or a business venture is no longer being pursued, for example – a surprisingly high number of companies fail, perhaps a sign of a challenging business climate. There is a mixed local picture of the free support and advice available to new and growing businesses, with many services cut in the last few years.

Education can also play a role in helping those forming a business for the first time become aware of their statutory responsibilities, and the consequences of their choice of business structure. With so many companies struck off by the regulator because they’ve failed to file accounts or the annual confirmation statement, it’s clear that many first-time directors struggle to understand and manage the requirements of their new company.

This is also an area where good choices by a new business, in appointing a good accountant and making use of helpful business software like Inform Direct, can make a big difference to their chance of survival.

The impact of regional variations

While far from universal, the pattern of record-breaking company formation figures reached across geographically diverse areas of the UK. There were all-time high formation figures for London in the south and Lancashire in the north, as well as both urban Hackney and rural Herefordshire.

There were, however, still some significant variations between different parts of the UK:

  • Northern Ireland saw a marked increase in company formations, with 8,137 formations in 2018 compared to 7,398 in 2017. The 6.8% growth in the Northern Irish company population – up from 58,754 at the end of 2017 to 62,765 at the end of 2018 – was the highest percentage growth rate of any of the nations of the UK. The 38.8% five-year growth rate in the company population also beat each of England, Scotland and Wales.
  • Wales also witnessed an annual increase in company formations, from 17,408 in 2017 to 18,079 in 2018. That meant that the number of companies based in Wales reached 120,705 at the end of the year. But, with 17,908 Welsh companies dissolved in 2018, it was very close to ‘one in, one out’ for companies in Wales.
  • Scotland was the only nation of the UK which saw a lower number of formations in 2018 than the previous year – 33,333 compared to 34,002. The 3.7% growth in number of companies based in Scotland – from 237,941 to 246,862 – was also the lowest percentage growth rate among the nations of the UK.
  • England, as would be expected based on population, was home to the lion’s share of new UK companies. The 598,323 new companies in England was a record figure, up from 569.585 in 2017. Even when the figures are adjusted for population, English entrepreneurs are still generating new companies at a faster rate than other areas of the UK. There were 11.3 formations for every 1,000 people in England, which compares favourably with 5.9 in Wales, 6.3 in Scotland and 4.5 in Northern Ireland. However, 30.3% growth in the number of English companies over 5 years remains the lowest of any the nations of the UK.
  • London continues to dominate company startup activity in England (and, thereby also the UK as a whole). Of the 598,323 formations in England in 2018, 217,617 – so well over a third – were based in London.
  • Outside London, the most busy areas for new company formations in England are the West Midlands (32,571), Greater Manchester (31,875), West Yorkshire 18,204) and Essex (17,063).

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2019 Review
of UK Company Formations

Read our comprehensive review of UK company formations in 2018, year-on-year growth rates and breakdown by county. This detailed insight is provided in the form of easy to understand infographics available for sharing through social media and on your own website