Failure rates amongst startups at lowest level in a decade, PwC finds

The failure rate of new businesses relative to total insolvencies is said to be at its lowest level for more than a decade, according to new analysis from PwC. In 2024, startups accounted for 46% of total company insolvencies, the lowest proportion in a decade by a large margin, when the average proportional percentage of startup insolvencies over the past decade was 60%. Last year marked the first year the rate has fallen below 50%.

Non-startup insolvencies are still twice as high, according to the Big Four firm. It added that pressure has been felt “particularly” across the retail, hospitality, manufacturing and construction sectors. 

Much of this is due to non-startups having traditionally higher fixed cost bases, such as larger workforces, site footprints or input supply costs – leading to greater exposure to inflationary pressures such as increases in wages, rents, tax rates and supply costs.

PwC added that since 2021, startups have faced their fair share of challenges, including what it called a “significant” decline in venture capital (VC) funding, reduced investor risk appetite for later stage investments, changing macroeconomic and geopolitical environments, and a “cooling” of the IPO market.

In light of this, companies have needed to realign their cost base and “scale of short term ambition”. 

John Baker, startup specialist at PwC UK, said: “Although total corporate insolvency figures saw a marginal fall year-on-year in 2024, overall insolvency levels remain at some of the highest seen in decades. This is a concern for small and medium sized businesses who typically have limited financial resources to fall back on, as well as larger, more established businesses, given their higher fixed cost bases.

“The notable decline in the startup failure rate is a sign that many have had to make difficult decisions and adapt at pace due to necessity. However, concerns about cash conservation and available runway will persist for many founders, management teams, boards and investors.”

He added: “The rapid advancement and transformative potential of GenAI presents a huge opportunity for startups and scaleups to grow their businesses at speed with limited upfront investment and reduced ongoing costs. Companies that can adapt to market changes, harness technology, prioritise customer needs and maximise their staff and resources are the ones most likely to become the market leaders of tomorrow. 

“No one wants to sleepwalk into being the next ‘zombie’ company. The critical question is whether those that have implemented cutbacks and survival strategies can transition back into sustainable, long-term growth or risk stagnation by losing their relevance and missing their market opportunity.”