The number of startups filing for administration in the UK was at the highest level for 10 years in September, new data from Plexal and Beauhurst shows, as the impact of coronavirus takes its toll on new businesses.
Over 1,000 businesses have filed for administration, liquidation or dissolution since lockdown began in the UK in March. In September, 273 companies filed for administration, a 181% month-on-month increase compared to August.
The data highlights the delayed impact of the coronavirus pandemic on the economy, the report’s analysts say, with government support schemes artificially holding off problems until September.
“The government commendably offered a number of startups a lifeline at the peak of the crisis,” explains Andrew Roughan, managing director of Plexal.
“But despite the slowly improving funding picture, we are now starting to see the pent-up effect of the pandemic on UK businesses — in particular early-stage startups.”
The increase in failures has been most keenly felt in London, where 388 companies filed for administration, liquidation or dissolution since April. In Scotland, 49% of the filings since April were made in September.
In recent years, the number of filings in the country grew naturally as the number of high-growth businesses increased, Henry Whorwood, head of research at Beauhurst explains.
The country then started to see a reduction in the number of companies filing, he says, as a result of government initiatives to help small businesses, but this changed when the pandemic hit.
The UK has also seen a reduction in investment going into startups — since March, companies have raised £5.4bn, down 18% from 2019.
And there’s a clear disparity between mature startups and newly founded ones too. Only £458m has been raised by startups raising investment for the first time in 2020, representing a 55% year-on-year decrease on last year.
The health of startups is critical for the country’s economic recovery overall, explains Roughan. “It’s these businesses that will provide the innovation and jobs that will drive the UK’s economic recovery, and they need our urgent support.”