Job creation from new businesses in the UK has plunged to its lowest level in eight years, as fresh data highlights a growing mismatch between start-up formation and economic sustainability. According to Cynergy Bank’s latest Business Births & Deaths Index, new firms are hiring fewer staff while closures and relocations are wiping out more economic value than new ventures are generating.
The index, which draws on data from the Office for National Statistics (ONS), shows that the average number of employees per new business in Q1 2025 fell to 2.64 — the lowest level since records began in 2017. This marks a steep decline from 3.5 employees per start-up just eight years ago.
At the same time, the financial impact of business closures continues to rise. In the first quarter alone, companies that closed or relocated abroad accounted for a combined turnover loss of £27.4 billion — an increase of £5.1 billion from the same period last year. Over the past 12 months, business shutdowns erased £92.7 billion in turnover, surpassing the £90.4 billion generated by new firms in the same timeframe.
“It is concerning to see new businesses employing fewer staff, while turnover lost from closures and relocations is at record levels,” said Nick Fahy, Chief Executive of Cynergy Bank. “Some of this may reflect larger firms choosing to leave the UK in response to recent tax changes, highlighting the urgent need for a more supportive business environment.”
The employment picture is equally stark. Net job creation from start-ups versus closures stood at just 4,334 in the first quarter, suggesting that while entrepreneurial activity persists, the new businesses emerging are smaller and less labour-intensive.
The report also flags a continued rise in creditors’ voluntary liquidations, an indicator of mounting financial stress among SMEs. Concerns have been raised that significant tax and creditor debts are being written off without sufficient oversight, further straining the broader economy.
Despite these headwinds, certain sectors remain resilient. Real estate, education, finance, and health continue to show strong start-up activity, indicating that the UK’s entrepreneurial drive remains intact — especially in high-growth industries. However, sectors like farming are faring worse, with business closures outpacing new formations by more than two to one.
Fahy urged policymakers to respond: “We must ensure our tax, regulatory, and capital frameworks empower UK entrepreneurs to build and scale sustainably. Start-ups can be a powerful engine for recovery — but only if they’re given the right tools.”
As the government prepares its next fiscal update, the findings offer a clear message: without stronger support, Britain’s start-up sector may struggle to offset the deepening impact of business failures.
