Number of UK business closures surge as supply chain disruptions bite

·Reporter
·2-min read
Number of UK business closures surge as supply chain disruptions bite
UK business closures in the third quarter of the year climbed 50% when compared to the same period a year ago. Photo: Ben Stansall/AFP via Getty

The number of UK business closures in the third quarter of the year climbed 50%, when compared to the same period a year ago, as labour shortages and supply chain disruptions took their toll.

According to the latest figures from the Office for National Statistics (ONS), the largest increases in closures were in the transport and storage (up 101%), and business administration and support services (up 66%) industries.

However, all 16 of the main industrial groups showed an increase of companies shutting their doors in the last year, amounting to a total of 100,835 in the period.

Freight transport by road and other postal and courier activities were the two main industries contributing to the increase in closures in transport and storage.

The ONS counted business closures as firms that were removed from the Inter-Departmental Business Register (IDBR). A business is removed from the IDBR if its turnover and employment are zero for several periods, or if the Office for National Statistics (ONS) is notified that the business has ceased trading through an administrative source.

Read more: UK service sector growth slows amid staff shortages and supply chain disruption

“It is likely that business closures in Q3 2020 were low in part because of the help provided to businesses by the government throughout the coronavirus pandemic in the UK,” the ONS said on Thursday.

It comes as the UK grapples with ongoing supply chain issues due in part to a shortage of delivery drivers in the UK.

Supply chains have been hit by a "double whammy" of drivers going back to their home countries either due to uncertainty over new Brexit rules or COVID-related restrictions which has lead to a major shortage.

Trade bodies have estimated the UK currently has a shortage of about 100,000 heavy goods vehicle (HGV) drivers.

In contrast, the number of business creations in Britain during the three months to the end of September rose 4% to 84,435 compared to a year ago.

Read more: UK faces years of high taxes, warns think tank

Half of the industrial groups showed more creations in Q3 than the same quarter a year ago, with the largest increase seen in the transportation and storage industry, up almost a third, and the largest decrease seen in retail, which fell 30%.

Between 2017 and 2020, the average new business created between July and September had around 3 employees, while the average number of employees in Q3 this year was 18% lower, at 2.5 employees.

The ONS pointed out that businesses which have been created since the outbreak of COVID-19 tend to be smaller in terms of employment than those created prior to the pandemic.

Watch: Economist: Supply chain crisis is here to stay for 'quite some time'

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