More Small Firms but no Guarantee of Growth by Liz Barclay

The small business population is rising again, but too few are hiring. Without tackling costs and red tape, recovery will stall.

Today, the government published the latest Business Population Estimates for the UK and Regions. It estimates there were 5.7 million businesses at the start of 2025 of which 5.64 million are small (0-49) employees. The real question is, are small businesses bouncing back or are the figures only part of the story?   Small firms make up more than 99% of all UK businesses, employing 13.1 million people. However the figures are an estimate of the total number and don’t tell us how many started up, are trading and closed down. 

The total number does tell us that we’ve lost nearly 300,000 businesses since 2020. The tota; os still well below the peak of 5.94 million. The sharpest drops came during COVID when almost 400,000 disappeared in a single year. Most of those were sole traders. Between 2024 and 2025, numbers rose by 190,000 (+3.5%). Again almost all of those are self-employed people. Starting up is one thing. Growing and hiring people is something else entirely.

Small businesses generate £1.9 trillion in turnover, around a third of the UK tota. That’s no drop in the ocean and those small businesses are vital to the UK economy, wider society and their local communities. However if we want the kind of growth in the economy that the Government wants, so that it can spend more on public services we need that figure to grow. Few businesses can grow without expanding and taking on employees.

In my Business 111 work, I hear from people held back by rising costs, complex rules, lack of confidence in the business environment leading to reluctance to invest, lack of skilled people and endless paperwork. The will to grow is there, but the system isn’t helping.

Tax incentives, simpler business rates, better mentoring, and targeted support for employers could shift the dial.

Britain’s entrepreneurs are tenacious, resilient and tough but as long as taking on the right people to help businesses grow is too onerous, expensive and risky, sole traders will continue to go it alone instead of creating the jobs and growth the UK so badly needs.

Liz Barclay was the MG’s UK Commissioner for Small Businesses.  She is now: – IoD Special Adviser Small Business and Entrepreneurship; Founder Business 111; International Council for Digital Trade and Innovation and the NED Trustmark.