New analysis of Companies House data has confirmed the harsh environment entrepreneurs enter into when starting a business, with almost 40,000 companies failing to pass their first year of trading since 2007.
After assessing data of businesses incorporated in the past decade, company formation agency Turner Little uncovered how many went into liquidation, administration or had a proposal to be struck from the register in the same year of foundation.
Providing an overall picture of the years between 2007 and 2016, a total of 39,674 companies went into liquidation – the legal ending of a business – in the same year they were founded, having failed to either grapple financial planning or the strength of competition.
In the same period, 1,401 firms went into administration in their first year, handing over legal ownership of the company to an insolvency practitioner.
Curiously, the financial crash did not dampen the UK’s entrepreneurial spirit. From 2010, the number of incorporated companies increased year-on-year, with 2012 seeing the most new businesses.
The most risky year to start a business appeared to be 2015, which saw the highest liquidation rate of the timeframe.
Read more: The difference between insolvency, liquidation, bankruptcy and administration
Turner Little analysed CreditHQ data to find out how different industries fared in terms of first-year survival rates
| Industry | Rate of survival after first year |
| Information and Communication | 93.8 per cent |
| Retail | 92.9 per cent |
| Professional, scientific and technical | 92.9 per cent |
| Motor Trades | 92.7 per cent |
| Education | 92.6 per cent |
| Wholesale | 92.6 per cent |
| Health | 92.1 per cent |
| Transport and Storage | 92 per cent |
| Accommodation and Food Services | 91.3 per cent |
| Arts, entertainment & recreation | 90.3 per cent |
| Production | 90.1 per cent |
| Construction | 90 per cent |
| Business admin & support services | 86.4 per cent |
| Property | 85 per cent |
| Finance and Insurance | 83.2 per cent |
Commenting on the findings, James Turner, managing director of Turner Little, elaborated on some of the unexpected challenges of entrepreneurship.
“Setting up a company requires a lot of patience and commitment. People often underestimate the constant hardship, instead the expectation tends to revolve around instant results and success.
“This does not tend to be the case, especially in the first few years. During the inception period, a company needs to ensure every aspect of its operations are evolving and adapting to the changes around them on the micro as well as macro level to ensure growth and sustainability”.
Turner Little produced the below infographic to demonstrate the consistent drop-off rates for incorporated companies in the last decade
Find out why startup survival rates are higher in Britain’s most remote areas
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