1-year survival
ONS Business Demography data shows that roughly 80% of UK businesses started in a given year survive to their first birthday. So around 20% of new UK businesses fail in year one.
3-year survival
Around 60% of UK businesses survive to their 3rd year. So about 40% have closed within 3 years of starting.
5-year survival
The 5-year survival rate is approximately 40-45% of UK business births. About half of new businesses have ceased by year 5.
Sector variation
Survival rates vary significantly by sector. Higher survival: professional/scientific/technical, real estate, health. Lower survival: hospitality, retail, arts/entertainment.
Common failure causes (industry research)
The most-cited causes of small business failure in UK industry research:
- Cashflow problems (late payments, thin buffer)
- Under-pricing / not covering true cost
- Insufficient demand for the product/service
- Over-concentration on one or two clients
- Founder personal circumstances (health, family)
Sources
About 20% of UK businesses started in a given year don't survive to year 1.
Cashflow problems, under-pricing, and demand mismatch are the three most-cited causes.
Some evidence suggests limited companies have slightly higher survival than sole traders on average, though this correlates with business size and sector rather than being causal.