After sole trader status, the limited company is the most popular business structure in the UK. Here we look at how many there are on the official register, and how the number of incorporated businesses has grown massively over the past 20 years.
Where can you find the official statistics?
The main source of data is the Government’s own business population estimates (January 2020), with additional data provided by the registrar of UK companies, Companies House.
How many companies are there in the UK?
Unlike business population estimates for other types of business (sole traders and partnerships), it is possible to provide exact numbers of incorporated businesses – as all companies have to be legally registered centrally, which is not the case for all businesses.
- At the start of 2019, there were 5.9m private sector businesses in the UK, representing a 3.5% increase over the year before.
- There were 3.5m sole traders (‘self-employed’), 2 million actively trading limited companies, and 405,000 ordinary partnerships.
- However, according to Companies House data, there were over 4.2m companies on its register in March 2019.
- The reasons for the discrepancy is that over half of all companies are either not actively trading, or are in the process of being dissolved or liquidated.
- The total number of companies has grown significantly over the past few years; there were a mere 2,686,157 in Q1 2011, but this number has risen by just over 1.5m in just 8 years – an increase of over 56%. Again, most of these new companies are not actively trading – the majority are dormant.
- The average age of a UK limited company is 8.5 years – a number which has fallen from 10.7 years at the start of the century.
Growth in small businesses of all types
Although the number of incorporated businesses has grown rapidly since the 2008/9 recession, the same trend applies to unincorporated businesses.
Since 2000, the total number of private businesses has increased massively and now stands at nearly 6m, an increase of nearly 60%. Although the percentage year-on-year increase varies according to factors like the health of the economy at any given time, the average increase is around 3%.
Why have the numbers increased so much?
There are many reasons why the general business population has grown so fast – and entrepreneurship is unlikely to be the main reason.
According to the Resolution Foundation, much of the growth (over 60% since 2009) is due to the tax advantages offered to the self-employed (particularly limited company workers), compared to traditional employees.
There are tax advantages to incorporating – this is true, but it is worth noting that company directors do not receive any of the ‘perks’ associated with regular employment – the cause of much friction between freelance organisations and the tax authorities.
The remainder of the growth in ‘self-employment’ is likely to be made up of individuals in the more ‘precarious’ sectors of industry – the so-called ‘gig economy’, where people are more often forced into self-employment rather than as a choice driven by aspirations or tax advantages.
Of course, the Government’s claims to have record numbers of people in work include many thousands who are on zero-hour contracts and other non-traditional ways of working.
Changes in the way buy-to-let landlords are taxed are initially responsible for a rapid rise in the number of property-related limited companies. However, new punitive rules have been introduced since 2017, and together with the inevitable economic fallout from the COVID-19 crisis, this may lead to a fall in the number of new incorporations.
Businesses in the UK – some interesting facts
- In 2019, three-quarters of all businesses did not employ anyone aside from the owner.
- There are 1.1m businesses in London, and 940,000 in the South East – together accounting for 1/3 of all UK businesses.
- London has seen a 52% increase in total business numbers since 2010, compared to a mere 4% rise in Northern Ireland.
- Businesses providing ‘Professional, Scientific, and Technical Activities’ account for 15% of all SMEs in the UK – over 800,000 enterprises. In fact, only the construction industry accounts for a higher number of businesses.