When a company is dissolved, it’s struck off the Companies House register and ceases trading. It’s a big step to take, and one that was made by 534,777 UK companies last year. That’s the second highest number of such company dissolutions in the last decade, following the 601,773 that dissolved in 2021, largely a result of the ongoing impact of the pandemic. That’s according to NerdWallet’s research into Companies House data over the past 10 years.
While these figures mask the incredible growth the UK’s business population has undergone in the last decade – the number of businesses registered with Companies House almost doubled between 2012 and 2022 – it reflects just how tricky the last two years have been for businesses.
The growing cost of living crisis, rising inflation, and soaring business energy bills may have forced many business owners to make this hard decision. But this phenomenon hit some areas and industries harder than others.
Below, we take a look at the worst hit, and most resilient, business populations in the UK, as well as which sectors were the most affected.
Is Northern Ireland the UK’s most resilient business population?
On a regional basis, Northern Ireland potentially emerged with the most resilient business population in the UK. Just 6.1% – 4,498 – of Northern Irish businesses registered with Companies House on 1 January 2022 were dissolved by the end of the year.
In comparison, London saw the largest number of companies cease trading in 2022. A staggering 174,910 companies based in the UK capital shuttered last year, or 12.2% of the capital’s business population.
Meanwhile, Wales lost a slightly higher percentage of its businesses registered with Companies House. With 18,236 companies dissolved, Wales shed 12.5% – an eighth of its business population in 2022. Scotland fared better in percentage terms, losing 9.2%, or 25,459, of its businesses.
This discrepancy between Northern Ireland and the rest of the UK is even more evident when you break down the numbers by local authority. In fact, four of the five least affected areas in the UK are in Northern Ireland.
Ranked by the percentage of active companies dissolved in 2022, only the Shetland Islands in Scotland had fewer dissolutions than Fermanagh and Omagh, Mid Ulster, Causeway Coast and Glens, and Derry City and Strabane in Northern Ireland.
Northern Ireland may have outperformed the rest of the UK due to the fact that, under the Northern Ireland Protocol, it has effectively remained part of the European Union single market for goods. That could change in 2023, however, as Prime Minister Rishi Sunak and Northern Ireland’s Democratic Unionist Party (DUP) look to bring the Protocol more in line with UK customs laws.
Local business communities suffer
While Northern Ireland’s local authorities showed their resilience, other areas weren’t so lucky. It is when you start to look at these local authorities that you get a greater sense of how smaller business communities are being wiped out.
For example, Oadby and Wigston in Leicestershire lost more than a fifth (20.87%) of its businesses in 2022, along with the Forest of Dean in Gloucestershire (20.22%).
The Welsh capital of Cardiff wasn’t far behind, with 19.90% of its active companies dissolved by the end of 2022. Newham, meanwhile, lost the greatest percentage of businesses in London, at 19.95%.
By actual number of dissolutions, places such as Oadby and Wigston and Forest of Dean are nowhere near the top, though. The former lost 1,040 businesses while the latter suffered 887 dissolutions – compare that to 21,293 dissolutions in Camden, north London, and it doesn’t seem as severe.
Yet that’s not the full picture. It’s why looking at the percentage of business population lost is so important – the greater the percentage lost, the bigger the impact it will have on the local economy, employment and community.
What makes the Forest of Dean such an interesting case, in particular, is how long-tenured the companies that dissolved were, with a median age of 12 years. That’s well above the median dissolution age for UK businesses as a whole.
In both 2021 and 2022, the median age of a dissolved company was two years. This means that half of the businesses that were dissolved in 2021 and 2022 were only operating for a maximum of two years before they had to cease trading.
While this UK average reflects just how tough it is to keep a new business going long-term, what happened in the Forest of Dean suggests something arguably more damaging. It is a community that saw a lot of established, long-standing businesses disappear due to the challenges posed by 2022. And the loss of these companies not only harms the local economy, but can damage a community’s sense of identity.
2022: a fatal blow to the high street?
Just as company dissolutions varied greatly across the UK regionally, different industries were hit harder than others.
Unsurprisingly, the retail industry suffered the most, with 58,330 company dissolutions in 2022. That meant that the sector shrank by over a 10th (11.2%) last year.
And while not every company included in that number will be a bricks-and-mortar retail outlet, it echoes the latest report from independent retail analyst the Centre for Retail Research that showed there were 17,145 store closures on British high streets in 2022.
The existence of the UK high street as we currently know it is in danger. Will we look back upon 2022 as the year the sector was dealt a fatal blow?