Survival rates for new businesses pitiful as 60% fail before fifth year, claims report

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Start-up businesses face huge challenges in their first five years to the extent where 60% of new firms fail before they reach their fifth year, according to a new report.

New research has claimed that 10% of start-ups fail in their first year, 25% by the second, 40% by the third and by year four almost half had died.

The report, from the Institute of Innovation and Knowledge Exchange (IKE), says that most new enterprises do not grow and that despite government support they rarely help grow the economy because of “low paid and insecure work”.

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Half the would-be entrepreneurs cited the perceived barrier to starting a business to be funding. The UK invested £10m of risk capital to help product more than 1,000 start-ups. Crowdfunding has also been successful at helping businesses to launch.

The report found that product or process innovation activities are predominately found in enterprises of 250 or more employees with 69% of all activity produced by these enterprises in this size range being innovation-focused.

The UK’s stagnation in productivity has fuelled a renewed focus on entrepreneurship to drive up growth, the report added.

But the wide-scale failure of many start-ups has been attribute to a lack of more diverse skills than the ones needed to create the business in the first place.

Larger teams in bigger start-ups have better survival rates, are more innovative, become successful exporters, have greater business longevity and drive employment growth, the report suggests.

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