The UK business population fell by an estimated 104,000 in the year to the start of 2026, taking the total to 5.6 million, according to government figures published yesterday.
The fall was driven by the loss of 157,000 self-employed people who were not registered for VAT and had no employees. Over the same period, the number of businesses employing people rose by 54,000.
The annual business population estimates show the total has now fallen by 394,000, or 6.6 per cent, since 2020.
The government’s statistical release says the decline between 2025 and 2026 is not statistically confirmed. The 95 per cent confidence interval around the total is plus or minus 109,000, and the publication remains classed as official statistics in development.
The latest figures extend a pattern Business Matters has reported on before, with the loss of self-employed and one-person firms since the pandemic accounting for much of the decline while the number of employers grew.
Tina McKenzie, national chair of the Federation of Small Businesses, said: “It’s worrying to see that there are 100,000 fewer SMEs in the UK economy. Entrepreneurship is essential to get the economy growing again.”
According to the statistics, the private sector is made up of 5.5 million firms with fewer than 50 staff, some 4.1 million of which are sole traders without employees.
Companies and partnerships employing between 50 and 249 staff number 39,220, while 8,355 businesses are larger employers.
Small and medium-sized enterprises employ 60 per cent of the private sector workforce and generate almost £2trn in turnover, compared with £2.8trn generated by large companies, the figures show.
London is home to just over one million businesses, and the South East of England has 864,000 of the 5.6 million total.
The North East has 163,000 businesses, the lowest number of any English region and down from 167,000 the previous year. The East Midlands recorded the largest fall over the year, losing 46,000 businesses.
The Office for National Statistics said Yorkshire and the Humber was the only region of England not to have seen a fall in business numbers since 2020.
Across the rest of the UK, private sector business numbers rose by 2,000 in Wales, but fell by 10,000 in Northern Ireland and by 2,000 in Scotland. The statistical release puts the fall in England over the year at 94,000.
A government spokesperson said: “We want to run the most pro-business country in the world and we are committed to making Britain one of the best places in the world to start and scale a business.
“We know some businesses are facing cost pressures, that’s why we are taking around 70,000 more retail, hospitality and leisure businesses out of business rates altogether, giving 25 per cent off electricity bills to eligible industrial businesses and introducing a new founders relief to encourage a new wave of wealth creation.”
The business rates measure was announced by Chancellor John Healey in the Budget on 28 October, when he raised the small business rate relief threshold for retail, hospitality and leisure firms from £12,000 to £18,000.
In the same Budget, Healey announced a 10 per cent founders relief on lifetime gains of up to £10m, while halving the lifetime limit for Business Asset Disposal Relief from £1m to £500,000.
