The most dangerous sectors to start a Business

by Startacus Admin

Business closures are falling, but across the UK there are several sectors that are more risky to start up in than others.

Chris Conway is the MD of Accounts and Legal a leading Small Business Accountancy firm based in London. Here he writes about the sectors and regions in the UK that are more risky to 'start up' in that others.

According to the Insolvency Service, company insolvencies in 2015 fell to their lowest levels since 1989.

An estimated total of 14,629 companies in the UK entered into insolvency in 2015, which was 10% lower than in 2014 and the lowest annual total since 1989 when 10,456 companies entered insolvency.

The most dangerous places to start your business

Unsurprisingly, London has the most active enterprises in the UK at 500,825, yet also the highest rate of business failures at 10.6%.

However, that is not actually much higher than in other parts of the UK.

In 2014, the North East region of the UK had 68,775 companies and 6,985, creating a death rate of 10.2%.

In the North West there were 249,465 companies and 25,300 deaths, giving a toll of 10.1%.

The safest place appears to be the South West of the UK where there were 215,905 active businesses and 19,275 deaths, giving a rate of 8.9%.

Outlining the different regions in the UK and their business death rates, we’ve created a map showing which regions are the most risky to start a business in. 

The most dangerous sectors

Running a pub or bar may sound glamorous, however these sorts of businesses, along with restaurants, cafes and takeaways actually have the highest death rate at 13.7%.

There were 150,350 companies listed in this sector in 2014, and a whopping 20,650 closures.

Also at high risk, there were 171,455 companies in the administrative and support sectors with 19,755 closures in 2014. This is a wide ranging sector including window cleaners, gardeners and packaging companies with a rate of failure of 11.5 %.

Fashion retail businesses are also fairly risky, with 23,935 business failures in 2014 out of 218,880 companies, giving a business mortality rate of 10.9%.

Builders and decorators should also be concerned, there were 203,385 active construction businesses in 2014, and 19,925 failures, giving a failure rate of 9.8%.

In comparison, anyone working in property, such as developers or estate agents, can feel happy as the failure rate in their sector is relatively low at only 7%.

There were 99,925 real estate businesses in 2014 and just 6,990 closures, giving a 7% death rate.

What causes businesses to fail?

Unfortunately for entrepreneurs there a many ways that a business can fail.

But businesses which require a high upfront investment, with a revenue stream which is not entirely predictable are naturally those that carry the higher risk.

Another factor is the intensity of the competition and the way in which entrepreneurs are able to differentiate compared to their peers.

So, although London has a high birth rate, there’s no doubt that this also contributes to the high proportion of business failures. Whilst the number of businesses is growing, the size of the market is not, and that means that only the best businesses survive.

About Chris Conway

Chris Conway is the MD of Accounts and Legal a leading Small Business Accountancy firm based in London who offer accounting, tax and employment law advice and services.

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• #insolvency

Published on: 22nd March 2016