Start-up boom, survival bust: Britain’s small firms are being squeezed out

I’ve received this thoughtful and sharply argued submission from one of our members on www.Business111.com, Sam Acton, and it deserves a wider audience.

At Business111 we spend a great deal of time helping small and micro businesses navigate the day-to-day reality of running a company in the United Kingdom. What Sam has done here is step back and connect that lived experience to the bigger picture—drawing on the latest findings from the Global Entrepreneurship Monitor.

Her central point is uncomfortable but hard to ignore: the UK does not have a start-up problem. It has a survival problem. That distinction matters, because it challenges how policy is designed, how success is measured, and how we support people who take the risk of building a business.

What follows is Sam’s full submission.

Sam Acton

I’ve spent time recently going through the latest Global Entrepreneurship Monitor (GEM) report, one of the most widely used international studies of entrepreneurial activity (https://www.gemconsortium.org/reports/latest-global-report).

The headline most people will take from the GEM is this: more people are starting businesses. Sounds positive. However, it is not the headline that matters for the UK, which is: fewer start-up businesses are surviving.

Photo by Allison Saeng on Unsplash

We don’t have a start-up problem. We have a business survival problem. The report is clear that in the UK the transition from start-up to stable business is weak.

The report also signposts why this is happening. The system does not understand how businesses actually grow. Legislators are designing policy as if businesses behave in a straight line, which they don’t. For example:

• Income is usually uneven
• Growth is often slow before it is stable
• Risk nearly always increases before it reduces

Yet pressure is applied as if stability already exists at an early stage. This is not encouraging enterprise, it is distorting it.

Cashflow is not being squeezed. It is being dismantled. Businesses are not failing because they are weak. They are failing because their cashflow is being hit from multiple directions at once:

• Tax being brought forward
• Wage increases
• Employer cost increases
• Thresholds not moving with those costs
• More legislation landing at the same time

Individually, these can be dealt with. Together they break businesses.

In the UK, policy is being designed for bad actors, with an increasing proportion of the system focused on preventing misuse. The result is that good businesses carry the cost of fixing bad ones. The wrong outcomes are being measured and treated, undermining the possibility of a successful entrepreneurial environment.

A simple but significant example: a business that employs five people for twenty years—that’s 100 years of employment in total—pays its way, and serves its customers well is not a failure. It is a success. But it disappears inside the label “SME” alongside businesses operating at a completely different scale.

There is also an underlying cultural issue. The UK still does not deal well with failure. From an early age, we are taught to avoid getting things wrong rather than to learn from it. This carries through into business. The report talks about treating ‘exit’ as learning, however there is still stigma attached to closing a business.

Similarly, those who achieve greatly are often criticised and analysed for faults rather than recognised for their contribution, support of others, or philanthropy. These are symptoms of a self-limiting culture.

If we want more people to build businesses and keep going when things are difficult, that has to change. People need to experience risk earlier, understand it, and recover from it. Otherwise we create a system where people are encouraged to start, but not equipped to continue.

The report makes it clear that only a minority of countries have the conditions in place to properly support entrepreneurship. The UK is not leading that group. In some areas, it is going backwards.

While other economies are improving access to finance, simplifying regulation and strengthening support for business survival, the UK is adding cost, complexity and friction. That is a further incentive for the best entrepreneurs to leave.

There is also a question of accountability. Governments introduce policies, but who is measuring whether they are actually working?

Take the ‘Backing Your Business’ policy from July 2025. Is it grounded in the established knowledge of the GEM? Are its outcomes being measured against GEM indicators? Are survival rates improving as a result? If policy is not measured against real outcomes, it risks being performative rather than effective.

There is also a structural issue in how investment works. Businesses are expected to pitch to investors. But if entrepreneurship is as important as we say it is, that flow should not be one way.

Investors—banks and institutions included—should be competing to attract the right businesses. They should be pitching themselves, being clear about what they offer beyond capital and what success looks like in their portfolios. At the moment, too much of that is opaque, limiting access and reinforcing exclusivity.

Now layer the impact of AI on top of all of this.

AI is already reshaping employment. Fewer people are needed to deliver the same output, and that trend is accelerating. So we need to ask a simple question: where do those people go?

It is unlikely that pension systems or welfare structures are prepared for large-scale early exits from traditional employment.

The answer is that more people will need to create their own income. Entrepreneurship will no longer be a choice; it will become a mechanism for economic survival—for individuals and for the wider economy.

This is no longer about encouraging start-ups. It is about enabling people to sustain themselves. Right now, the UK is not set up for that.

Financial pressure is being applied before stability exists. Static or falling thresholds increase the tax burden. Very different businesses are treated as if they are the same. Systems are being created that add friction at the exact point businesses are trying to grow.

The good news is that this is fixable:

• Align obligations with actual cashflow
• Allow time for businesses to stabilise
• Ensure businesses are paid on time
• Stop grouping fundamentally different businesses together

Without tax receipts, wider policy ambitions cannot be funded. That makes this an entrepreneurial emergency.

The question is: who is going to respond?

About the author
Sam Acton is the founder of the Domestic Angels network of small businesses. She is a member of the BCP Council Audit & Governance Committee and a trustee of the Healthbus Charity. She has over 20 years’ experience building and supporting SMEs and contributes to discussions on employment, governance and sustainable business growth.