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Challenges Faced by New Businesses in a Post-Pandemic Economy

The year 2022 was a challenging one for many new businesses in the UK. According to recent data, almost 7,000 businesses less than a year old were dissolved in 2022, with online retail stores being the hardest hit. This comes as no surprise, given the impact of the pandemic and the shift towards online shopping.

Real Business Rescue analysed the 6,928 businesses which were incorporated and dissolved in 2022, to reveal the areas and industries where new businesses struggled the most.

challenges businesses

Shaun Barton, National Online Business Operations Director at Real Business Rescue, comments:

“Our research has highlighted the intense strain put on new businesses over the last year, as almost 7,000 businesses in their first year of trading were dissolved in 2022, with the average of these businesses lasting just 164 days. While there are a whole host of reasons to strike off a company, for these new businesses, it is likely that they never got off the ground at all.

“Many small businesses saw demand for their products and services fall as the economy struggled for growth and consumers reined in their spending. Rising inflation and soaring interest rates affected all businesses new and old and, despite introducing government support programmes, the sharp increase in energy bills has also contributed to the struggles facing businesses over the past few months.

“Now with the government scaling back support and protection for businesses in relation to their energy bills from April 2023, we expect to see corporate insolvency and liquidation rates rise considerably in the coming months.

New businesses formed this year are doing so in a particularly volatile environment. With the limited support, this could put even more pressure on start-ups getting off the ground than what we saw last year.”

The top 20 new businesses that were dissolved in 2022 provide an interesting insight into the sectors that have been most affected. Buying or holding property and renting it out came in second, followed by hairdressing and other beauty treatments in third place.

The average lifespan of these companies was just 164 days, highlighting the immense challenges faced by new businesses in today’s economy.

london covid

The data also revealed that more than one in five (22%) of these businesses were based in London, making it the worst-hit area for new business dissolutions in the UK. Birmingham was the second worst-hit area, followed by Cardiff and Manchester.

It’s important to note that these figures only account for businesses that were officially dissolved, and do not include those that simply ceased trading or entered into administration.

The impact of the pandemic on the economy has been widely reported, but these figures highlight the specific challenges faced by new businesses. With online retail being the hardest hit sector, it’s clear that businesses need to adapt to the changing landscape and find new ways to reach customers.

The average lifespan of these companies highlights the need for support and resources to help new businesses navigate the early stages of their development.

In conclusion, the data shows that 2022 was a difficult year for new businesses in the UK, with thousands of companies being dissolved in their first year of operation. While the pandemic played a significant role in this, the data also highlights the challenges faced by businesses in specific sectors.

Moving forward, it’s important for policymakers and support organizations to focus on providing resources and assistance to new businesses to help them navigate the challenges of the current economic landscape.

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