UK's small business landscape reaches eight-year high despite economic headwinds

The UK's small business sector demonstrated remarkable resilience in 2025, with active companies reaching a record 5.66 million, an increase of 0.82% on the previous year, according to the latest NatWest and Beauhurst Startup Index. 

The figures paint a picture of an entrepreneurial community that has adapted and endured through challenging economic conditions, with particularly strong growth emerging from unexpected regional centres outside the traditional London hub. 

While new company incorporations dipped slightly to 832,000, a 1.65% decrease from 2024, the numbers remained well above 2021 and 2022 levels, suggesting the UK's startup ecosystem has found a sustainable equilibrium after exceptional pandemic-era growth, which tallies with the findings from Enterprise Nation’s own Start Up Ambition report 2026.  

The North Rises 

Perhaps most striking is the geographic redistribution of entrepreneurial energy. The North East led the nation with 5.27% year-on-year growth in incorporations, followed closely by Scotland (4.27%) and the North West (3.55%). These figures signal a fundamental shift in where Britain's business future is being built, according to the report. This geographic shift also reflects the findings of the Start Up Ambition report, which found entrepreneurial intent highest in Yorkshire and the Humber and the North West. 

Darren Pirie, head of Accelerator at NatWest, said:

"The UK's entrepreneurial spirit remains strong, with active company numbers rising despite macroeconomic challenges.

"Small businesses drive growth across the UK, and NatWest is proud to support them to start and scale, which is why this year we're expanding our free Accelerator five-fold to support 50,000 members." 

London retained its position as the UK's startup capital, with 279,000 new businesses, although at a notably slower growth rate than in previous years. 

Technology leads the way 

The sectoral breakdown reveals where Britain's entrepreneurs are placing their bets. Software development emerged as the fastest-growing sector, with a remarkable 38.4% surge to 24,800 new incorporations. Online retail continued its strong performance, underscoring the permanent shift in consumer behaviour accelerated by the pandemic. 

Traditional sectors held firm too, with estate agent activities maintaining strong formation numbers, suggesting entrepreneurs remain confident in property-related ventures despite broader market uncertainties.  

The report found businesses completing NatWest's Accelerator programme reported 104% year-on-year turnover growth, compared with just 20% in a control group. Nine in ten remain trading after three years, far outperforming non-participants. 

Regulatory reality 

The landscape hasn't been without challenges, the research suggested.  New director identity verification requirements under the Economic Crime and Corporate Transparency Act contributed to a sharper-than-usual Q4 decline in incorporations. While these reforms increased scrutiny and likely tempered volumes, they're designed to strengthen the integrity of Britain's business ecosystem—a necessary growing pain for a maturing market. 

Aaron Asadi, CEO of Enterprise Nation, said:

"At 5.66 million active companies, Britain's small business ecosystem is at its strongest in eight years, but we must ensure these foundations can support the next generation of founders who are building businesses not just from passion, but from need, and doing so amid some of the most uncertain global conditions in a generation. 

“These figures demonstrate both the enduring strength and the evolving nature of Britain's entrepreneurial spirit in the face of significant headwinds. 

"What's particularly striking is the regional rebalancing we're seeing, the North East, Scotland, and North West leading growth shows that start-ups are no longer synonymous with London alone, and that's incredibly healthy for our economy, especially as global supply chains face unprecedented pressure.” 

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