Job creation from new businesses in the UK has fallen to an eight-year low, with start-ups hiring fewer staff and closures contributing to a rising economic toll, according to new analysis by Cynergy Bank.
The bank’s Business Births & Deaths Index, which draws on official data from the Office for National Statistics, shows that the average number of employees per new business in the first quarter of 2025 dropped to 2.64 — the lowest level since records began in 2017. That figure is down sharply from 3.5 employees per start-up recorded eight years ago.
At the same time, business closures and relocations are erasing more turnover than start-ups are generating, with the combined turnover of businesses shutting down or moving abroad reaching £27.4 billion in Q1 — £5.1 billion more than in the same period last year.
Over the past 12 months, total turnover lost to closures reached £92.7 billion, outpacing the £90.4 billion in turnover generated by new firms over the same period. This marks a reversal of the long-standing trend in which start-ups typically offset the economic loss from closures.
“It is concerning to see new businesses employing fewer and fewer staff, and the turnover of closing or relocating firms at an all-time high,” said Nick Fahy, Chief Executive of Cynergy Bank. “It’s possible that some of these larger firms are choosing to relocate abroad in response to recent unfavourable tax changes, which underscores the need for a more supportive environment for UK businesses.”
In terms of employment, the net job creation from start-ups versus closures was modest, with just 4,334 jobs added in the first quarter. The figure points to a growing challenge: while entrepreneurial activity remains high, the businesses being formed today are leaner, smaller and less labour-intensive.
The data also reveals a worrying trend in insolvency. Creditors’ voluntary liquidations — where companies agree to wind up due to insolvency — remain close to record highs. There are also concerns that significant tax and creditor debts are being written off without proper scrutiny, potentially placing further pressure on the broader economy.
Despite the overall decline in job creation, Cynergy Bank found that business formation remains resilient in many sectors. Real estate, education, finance and health continue to see strong start-up activity, suggesting that entrepreneurial appetite in growth sectors remains intact.
However, in some industries, the churn is more severe. In farming, for example, fewer than half the number of closing businesses are being replaced, indicating deeper structural challenges in the sector.
Fahy emphasised the importance of maintaining a robust environment for start-ups and SMEs: “Despite these sobering statistics, I strongly believe that the entrepreneurial spirit of the UK remains intact. But we must support it — with smarter taxation, accessible capital and clear regulatory signals.”
As the government prepares for its next fiscal update and reassesses its business support policies, the figures serve as a wake-up call: start-ups alone cannot offset the economic weight of business failures unless they are given the tools — and confidence — to scale.
