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The Highest “Death Rate” in Business, REVEALED

Per the Business Demography release, published by ONS in November 2017, there were approximately 2.85 million active businesses in the UK in 2016; an increase of 135,000 on 2015.

The research details the number of business births continued to increase from 383,000 to 414,000 between 2015-16, a birth rate of 14.6%.

“Birth rate” definition: New business registrations are referred to as business births. The birth rate is calculated using the number of births as a proportion of the active enterprises.

In 2016, the highest rate of business births continued to occur in business administration and support, at 23.1%, compared with a rate of 20.4% in 2015. The second-highest rate occurred in transport and storage, at 23%, compared with 20.3% in 2015.

London had the highest business birth rate, at 17.5% – followed by the East (15.8%) and West Midlands (15.5%.) Northern Ireland has the lowest birth rate, at 10.2%.

Image Credit: Sergey Nivens/Shutterstock

Since 2011, the rate of business births has continued to exceed the rate of deaths and the gap in rates has continued to widen in recent years – until 2016. This may reflect the uncertainty around the economic outlook towards the end of 2016, following the UK’s EU referendum’s results.

Indeed, the number of UK business deaths also increased from 283,000 to 328,000 between 2015-16, a death rate of 11.6%.

“Death rate” definition: Businesses that have ceased to trade are referred to as business deaths. The death rate is calculated using the number of deaths as a proportion of the active enterprises.

The highest business death rate, at 17% is seen in finance and insurance, compared with 13.3% in 2015. Followed by business administration and support, at 15.4% – compared with 10.1% in 2015. Turnerlittle.com sought to identify the top 10 businesses with the highest death rates:

From the infographic created by Turner Little, we can see that whilst finance and insurance (17%), business administration and support (15.4%) and property (15.2%) hold the top 3 highest death rates, exceedingly low death rates can be found in transport and storage (10.9%), production (20.8%) and retail (10.5%.)

The region with the highest business death rate was London, at 14%, followed by Scotland at 11.8%. Northern Ireland had the lowest death rate, at 9.2%.

Furthermore, it was found the UK five-year survival rate for business born in 2011 and still active in 2016 was 44.1%. By region, the highest five-year survival rate was seen in the South West, at 47%, while the lowest was in London, at 41.7%.

By broad industry, some notably high five-year survival rates include health, with a survival rate of 54.1% and property, with a survival rate of 51.1%.  Accommodation and food services had the lowest, with only 34.6% of businesses surviving for five years.

Image Credit: Rawpixel.com/Shutterstock

Certainly, in the creation of new business, no matter the industry, there is huge risk. Entrepeneur.com highlights risk to be accredited to 5 key areas:

  1. Product Risk

If you can’t explain what you sell, why you’re selling it and why people should invest – you won’t secure interest and sales.

  1. Market Risk

Knowing your customer and why, how and where they buy related products is arguably the most important risk factor to assess before launching a product.

  1. Financial Risk

Make sure to identify key business milestones and schedules that clearly identify the points in time when equity or debt investments are necessary to reach the next major milestone.

If you can articulate your business plan, growth path and reach each milestone successfully, this builds confidence in potential investors.

  1. Team Risk

Invest in people who believe in your company and instil a sense of confidence that they can help get your company across the finish line – and maintain it.

  1. Execution Risk

Many entrepreneurs can become so mired in the details that they completely lose sight of the overall company trajectory and strategy. Participate, evaluate the risks and don’t be afraid to pivot.

Managing director of Turnerlittle.com, James Turner notes:

“It is obviously, incredibly important to evaluate all types of risk when thinking about starting – or investing in – a business. Financial loss can be devastating.

However, the potential for failure should never put you off trying. My advice would be to research, thoroughly, read case studies, speak to people who have both achieved success and faced loss, and always tread with awareness.”

Image Credit: Sergey Nivens/Shutterstock

Feature Image Credit: Sergey Nivens/Shutterstock

Turner Little and its affiliates do not provide tax, legal or accounting advice. Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.