According to official figures released at the end of September 2023, the number of VAT or PAYE-registered businesses in the UK fell this year for the first time since 2011.
The Office of National Statistics revealed that as of March 2023, there were 2.73 million businesses signed up to pay Value Added Tax or Pay As You Earn (the system used to collect income tax and National Insurance from employees) in the UK. That is down by 1.5% from the same time in 2022. This is the first decline in over a decade since the fall of 0.9% from March 2010 to March 2011.
Small Businesses Hit Hard
The most noteworthy falls were among sole traders and partnerships, suggesting small businesses have been especially hard hit. Transport and storage, IT and communication and professional, scientific and technical businesses were all among the sectors seeing the sharpest declines. In addition, the decline in the number of businesses in London was slightly higher than the national average, at 1.9%.
Insolvencies Continue to Rise Throughout 2023
While the official data only goes up to March 2023, statistics released by the Insolvency Service suggest that the number of businesses has continued to decline further through 2023. Between April and June 2023, the number of company insolvencies in England and Wales reached the highest level since 2009. In August, the Insolvency Service announced 2,308 company failures, up 19% year-on-year. High-profile businesses to go bust this year include Wilko, Paperchase and Hunter Boot.
High inflation and increasing cost bases have made it a challenging environment for businesses and like many homeowners coming off fixed mortgage rates, many organisations have yet to refinance their debt. As a result, the full impact of higher interest rates may yet be felt.
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