Business creations outpace closures despite rising SME pressures

UK business creation remained resilient during the second quarter of 2026, with new enterprises continuing to outnumber closures despite ongoing economic uncertainty and mounting pressures across many sectors.

According to the latest quarterly business demography statistics from the Office for National Statistics (ONS), business creations increased by 2.2% compared with the same period last year, with new businesses established between April and June exceeding the number of businesses that ceased trading during the quarter. The figures provide a positive signal for entrepreneurial activity, although business closures also rose across most sectors, highlighting the challenging operating environment facing many SMEs.

The quarterly data, which tracks businesses entering and leaving the Inter-Departmental Business Register, showed particularly encouraging growth in business creation within the construction and professional services sectors, suggesting continued confidence in industries closely linked to investment, infrastructure and economic development. At the same time, increases in closures across much of the economy underline the continued impact of higher operating costs, economic uncertainty and weaker demand in some markets.

Phil Hughes, Deputy Managing Director of Paragon SME Lending, said the figures demonstrated the resilience of British businesses despite another turbulent quarter.

“Despite another period of turbulence with geopolitical conflict in the Middle East and a changing Government on home soil, today’s figures from the ONS show that British businesses have continued to demonstrate resilience. In a challenging market, business creations increased by 2.2% year-on-year and, importantly, outpaced closures during the quarter. There are warning signs however, with the rise in business closures across most sectors serving as a reminder that many SMEs face significant ongoing pressures.

“Comparing across sectors, it’s encouraging to see strong growth in new businesses across construction and professional services, indicating growing confidence in industries critical to investment, development and growth.

“SMEs are responsible for a significant share of economic activity, jobs and innovation, so supporting their growth should be central to the Government’s economic strategy. Burnham’s Government has an opportunity to strengthen business confidence by reforming the tax burden, backing skills development and supporting career pathways, and providing the stability which gives growing businesses confidence to invest. The talent and ambition is there and with the right operating conditions, SMEs can play a major role in helping Government achieve its mission to deliver growth in every postcode.”

The latest data suggests the UK’s business landscape continues to adapt despite a backdrop of geopolitical tensions, inflationary pressures and changing domestic policy. While stronger levels of business formation are a positive indicator for future economic growth, the rise in business closures highlights the importance of maintaining a supportive environment for existing SMEs alongside encouraging new start-ups.