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 have grown massively over the past decade.
Where can you find the official statistics?
How many companies are there in the UK?
Unlike business population estimates for other types of business (sole trader 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 2016, there were 3.3m sole traders (‘self-employed’), 1.8m actively trading limited companies, and 421,000 ordinary partnerships.
However, according to the Companies House data, there were 3,936,403 companies on its register in July 2017.
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 1.25m in just 6 years – an increase of over 46%. Again, most of these new companies are not actively trading – the majority are dormant.
Growth in small businesses of all types
Although the number of incorporated businesses has grown rapidly since the last recession, the same trend applies to unincorporated businesses. Since 2000, the total number of private businesses has increased by 2m, and now stands at around 5.5m.
Between 2010 and 2015, the number of sole traders increased by 578,000 (a 21% rise), whereas there were 358,000 more actively trading companies (a 28% rise).
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 (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 includes many thousands who are on zero-hour contracts, and other non-traditional ways of working.
Recent changes in the way buy-to-let landlords are taxed is also responsible for a rise in the number of limited companies. New punitive rules will take effect between 2017 and 2020. According to Countrywide, between 2013 and 2017, the proportion of homes let out by companies rose from 11% to 20%.
Businesses in the UK – some interesting facts
- In 2016, 76% of all businesses did not employee anyone aside from the owner.
- There are 1m businesses in London, and 900,000 in the South East – together accounting for 1/3 of all UK businesses.
- London has seen a 41% increase in total business numbers since 2010, compared to a mere 16% rise in the West Midlands.
- 823,000 people provide personal services via their businesses – 15% of all UK businesses. Only the construction industry has more businesses.