As of October 2023, 99% of UK businesses are classified as small or medium enterprises (SMEs), with 5.6 million operating nationwide. The vast majority (74%) are sole proprietorships or have zero employees. SMEs contribute £2 trillion to the UK’s private sector turnover, accounting for 52% of the total. A Forbes survey also shows 41% of Brits aspire to start a business, while many consumers prefer small businesses for local support, quality, and trustworthiness.

However, recent statistics show that more than 500,000 businesses have been forced to shut down since 2020. This disappearance reflects the significant challenges SMEs face, such as the economic impact of Covid-19 and Brexit. Key drivers include the collapse of self-employed individuals and one-person companies, which fell by 11%, largely due to issues like delayed government support and new tax regulations like IR35.

This downturn also intersects with the sharp rise in insolvency rates, particularly for SMEs. Inflation, rising costs, and increased economic uncertainty post-Brexit have made it difficult for small businesses to remain profitable. Stricter trading conditions, coupled with the complexities of post-pandemic recovery, have driven many SMEs into administration or liquidation.

Moreover, while the number of businesses with employees has increased, large firms are benefiting most from growth. This disparity highlights how SMEs—especially sole traders and small consultancies—have been particularly vulnerable to insolvency, lacking the financial buffers and access to capital that larger firms enjoy.

Industry experts warn that the missing half-million small businesses represent lost local jobs and innovation, underscoring the need for government action to ease pressures on SMEs. Recommendations include reforms in business rates, improved access to capital, and measures to counter rising operational costs, ensuring the survival of these essential wealth creation units.

These rising number of insolvencies opens the door for acquiring well-established businesses that simply couldn’t withstand economic pressures, offering entry into new markets or expansion at a lower cost.

Buyers also have the chance to negotiate favourable terms, such as securing businesses with existing customer bases, locations, or infrastructure, without the typical startup hurdles. With skilled workers from failed ventures entering the job market, there is also potential to acquire both talent and operational expertise at competitive rates.

To learn more about capitalising on the right opportunities at the right time, visit Administration List today.