Business Failures and Recoveries Statistics in the UK

It is crucial to investigate failures and successes when studying the business market. Looking at the failure statistics and numbers of different franchises and startups might help you answer the most pressing questions:

What are the chances of success my business has?

What are the main reasons for business failure in the current market?

How do we avoid those reasons?

What are the steps to take to recover?

What are the main strategies to follow to achieve ultimate success?

“It’s fine to celebrate success, but it is more important to heed the lessons of failure.”

Bill Gates

What are the Business Failure Statistics in the United Kingdom (UK) During the Past Couple of Years?

According to the latest records, small businesses are more susceptible to business failure circumstances. The numbers suggest that 20% fail during their first year and around 60% fail within the first three years. Reasons for failure vary. They include liquidity issues, poor market research, poor strategy, unsuitable pricing plan vs cost production and mismanagement.

The number of company bankruptcies in the UK has been increasing. Many UK businesses need help to satisfy the demands of creditors for overdue payments. Reports suggest that almost 747 company insolvencies took place in Wales and England, which is 18% higher than in the same period last year. The business failures in the UK have been increasing this year due to various factors, such as inflation, increased costs of borrowing, and the end of government support schemes enacted during COVID-19.

Business Failures Examples in the UK

While there are no specific examples of business failures this year, the reports suggest that small and medium-sized enterprises (SMEs) are the most affected, with SME liquidations making up nearly all of the increase in business failures. The most at-risk sectors include retail, hospitality, hotels, restaurants, and manufacturing, with significant energy consumption.

Six in 10 British manufacturers are at risk of going out of business due to soaring energy bills. Wilko, Clinton Cards, M&S Wetherspoons, and Iceland are among the businesses that have announced closures this year. Snapchat’s AI chatbot is facing a UK shutdown over risk to children.

Below, we will mention some of the examples with some details.

M&Co Clothing Retail

M&Co, the Scottish clothing retailer, went into administration for the second time in December 2022. The company continues to trade, although it has closed its Droitwich store until a buyer can be found. There are currently more than 170 stores and 2,000 employees. Most of the stores have ‘Closing Down’ notices on their windows, but decisions still need to be taken.

The company’s closure was a significant business failure blow for the UK retail sector, which has been struggling due to the COVID-19 pandemic and other economic factors. M&Co’s closure highlights the challenges many retailers face in the current economic climate, including higher costs, reduced consumer spending, and increased competition from online retailers.

Debenhams Brand

Debenhams, a well-known UK department store, failed in the UK in 2020 after 242 years in business. The company was struggling for years and was placed under administration for the second time in a year in April 2020 by its owners led by US hedge fund Silver Point Capital.

It all started to inflate in 2018 when Debenhams worked on a new brand identity and campaign designed to build brand affinity and demonstrate a renewed sense of confidence in the company. However, the company’s financial struggles continued, and it ultimately failed due to a combination of factors, including mismanagement, market disruption, and the COVID-19 pandemic.

The decision to liquidate Debenhams came after Philip Green’s Arcadia fashion group collapsed into administration, threatening 13,000 jobs. Arcadia was the biggest concession operator in Debenhams, accounting for about 5% of Debenhams’ sales, and its collapse looks to have been the final straw, making a sale of Debenhams that would be worth more than a winding-down process impossible.

In January 2021, its business failure as an independent was official. Online fashion retailer Boohoo purchased it for £55 million. Boohoo relaunched the Debenhams website as Debenhams.com in April 2021 under their own company, Debenhams.com Online Limited, when Debenhams’ stores reopened to begin closing down sales following a relaxation of some COVID-19 restrictions.

Since Boohoo did not retain any stores, almost 12,000 jobs were lost. By May 2021, all remaining UK stores were closed, marking the end of Debenhams as a department store retailer in the UK. Debenhams brand, however, has continued to trade online following its acquisition by Boohoo. It is unclear whether there are any plans to reopen physical stores under the Debenhams name.

140 Canvas

140 Canvas was a startup that failed in the UK. The company was founded by Harry, who had a business idea of selling fake tweets printed for £30. He launched the startup in just two months, but the company failed to gain traction due to a low conversion rate of 0.11%

The 140 Canvas business failure highlights the importance of validating a business idea before launching it. Unfortunately, there are no specific numbers available on the financial losses incurred by 140 Canvas. However, the low conversion rate suggests that the company needed to generate more revenue to sustain its operations. The company’s failure is a reminder that startups need to have a solid business plan and a clear path to profitability to succeed in the long run.

PizzaExpress

PizzaExpress is a popular restaurant chain in the UK that faced financial difficulties in 2019 due to high levels of debt. Despite being a business failure, the company underwent a significant restructuring and refinancing effort, which helped it to avoid bankruptcy. The company has since regained its position as one of the UK’s leading restaurant chains.

HMV

HMV, a well-known UK music and entertainment retailer, went into administration in 2018 due to increased competition from online retailers. However, the company was purchased by Canadian retailer Sunrise Records and has since been able to turn its fortunes around. HMV has reopened many of its stores and has seen a resurgence in sales

Thomas Cook

Thomas Cook, a major UK travel company, went into administration in 2019 due to a combination of factors, including high levels of debt and increased competition from online travel agencies. However, Fosun Tourism Group, a Chinese conglomerate, purchased the company’s brand and assets, which has since relaunched the Thomas Cook brand as an online travel agency.

Flybe

Flybe, a UK-based airline, went into administration in 2020 due to a combination of factors, including mismanagement and market disruption caused by the COVID-19 pandemic. However, the company’s assets were purchased by a consortium of investors, who have since relaunched the airline as a regional carrier under the name Flybe Limited.

Things to Learn from Business Failures Examples in the UK

Looking at the business failure examples is as essential as following the footsteps of the successful ones. There are some takeaway notes that you can look for or avoid while handling your business.

Importance of Business Strategy Formulation

Strategy formulation for any business is a core step towards thriving and recovering. It consists of different elements:

1- Creating a Vision statement that basically answers the question, “What do we want our business to become in the future?”

2- Creating a Mission statement that basically answers the question, “What is our business?”

3- External Opportunities Threats investigation to take advantage of opportunities and avoid threats.

4- Internal Strengths Weaknesses investigation relative to competitors. They are controllable elements which can be improved.

5- Long Term Objectives that Provide a basis for planning, organising, motivating, and controlling

6- Strategies selection that are the key towards achieving the company’s long-term objectives.

Examples of Alternative Strategies

• Market penetration: seeking an increase in market share
•  Market Development: introducing the product into a new geographic area.
•  Forward Integration: Gaining ownership over a distributor or retailer
•  Backward Integration: seeking ownership of suppliers
•  Horizontal Integration: seeking ownership over competitors

Importance of Business Strategy Implementation

Perhaps business strategy implementation techniques are the most important steps to execute in your business. It is not enough to choose the right strategy and set out your mission and vision; you also have to find the appropriate means for execution. Implementing your strategy minimises the chances of business failure and maximises the recovery probability if it happens.

What are the Dimensions of Strategy Implementation?

• Managing forces during the action.
•  Focusing on efficiency.
•  Setting the operational process.
•  Acquiring motivation and leadership skills.
•  Effective coordination among many individuals.

As you can see, strategy implementation is all about the efficient use of resources, including your business’ human resources.

Pretend that every single person you meet has a sign around their neck that says, ‘Make me feel important.’

Mary Kay Ash

What are the Steps to consider during the Strategy Implementation Phase?

Achieving the above-mentioned dimensions can be summarised in short steps. If considered and carefully studied, the chance for smooth business strategy implementation would increase.

• Set long-term and short-term objectives and company policies.
•  Allocate resources to be consistent with your objectives.
•  Learn how to manage conflict.
•  Match your company structure with your strategy.
•  Link strategic performance to the company’s reward system
•  Create a strategy-supportive culture.
•  Adopt an effective marketing strategy.
•  Acquire capital for strategy implementation.
•  Hire effective Research and development (R & D) personnel.
•  Have an effective Management Information System (MIS)

Importance of Business Strategy Evaluation

Although Plan A may be selected as the most realistic, the other major alternatives should not be forgotten. They may well serve as contingency plans.

Dale McConkey

Strategy Evaluation is one of the core steps in management. It ensures that the company is on the right track. If a crisis happens, regular Evaluation of all the strategic steps mentioned before will ensure a fast business recovery. Timely Evaluation would also make sure that things do not go out of control and that most possible crises are forecasted.

What are the Main Steps of Strategy Evaluation?

Strategy evaluation is a critical step in any organisation. It consists of three main steps:

1. Examining the underlying bases of a firm’s strategy
2.  comparing expected results with actual results
3.  Taking corrective actions to ensure that performance conforms to plans.

What are the characteristics of Effective Strategy Evaluation?

Too much reading into a text can mislead the reader’s understanding; the same goes for too much information for strategy evaluation. The following are the main characteristics of a successful strategy evaluation for your company:

• Strategy Evaluation activities should be meaningful and economical. Too much or too little information can cause more harm than good.
•  Information taken from the evaluation report should be action-oriented. Managers can easily disregard information for the sake of information.
•  Strategy evaluation should encourage trust and mutual understanding by being simple and not too restrictive.
•  Strategy evaluation should improve the contingency planning and auditing systems.

These examples show that it is possible for companies to recover from business failure situations and achieve success, even in the face of significant challenges. In many cases, a combination of restructuring, refinancing, and innovation is necessary to turn a struggling company around. By following the summary of business strategy guidelines mentioned, the chances of business failure are minimised.