Official figures show that, in 2011, 230,000 companies de-registered for VAT. That’s a closure rate of 10.6 per cent. Such a high rate is not an artefact of our weak economy; even in the best year (2006), 9.4 per cent of firms de-registered. The ONS estimates that of the firms that set up in 2006, only 45 per cent were still going five years later.
Granted, these death rates reflect the fact that mortality rates for very small and young firms are extremely high. Nicholas Oulton at the LSE’s Centre for Economic Performance points out that death rates decline sharply as firms get older and bigger. This is not entirely a causal relationship; older, bigger firms have shown an ability to survive, which augurs well for their continued survival. But even for these firms, death rates are significant.