Software startups surge 38% as British business numbers reach eight-year peak

Britain counted 5.66 million active companies in 2025, the highest figure in eight years. Yet new business registrations actually fell.

The contradiction reveals a maturing startup landscape. Whilst 832,000 fresh companies registered during 2025—down 1.65% from the previous year—the overall business base expanded by 0.82%, according to the latest NatWest and Beauhurst Startup Index published this week.

What changed was where and what.

The North East recorded the sharpest growth in new incorporations, jumping 5.27% year on year. Scotland followed at 4.27%, with the North West adding 3.55%. London still dominated in absolute terms—279,000 new businesses—but its growth rate slowed. Camden topped all local authorities for company formations, ahead of Birmingham and Edinburgh.

Meanwhile, Northern Ireland and Wales saw registrations decline, retreating to pre-2023 levels after earlier surges.

Software development emerged as the fastest-growing sector. Business and domestic software development companies climbed 38.4% to 24,800 new incorporations. Real estate remained among the top sectors overall, with both property letting and buying-and-selling activities posting year-on-year gains. Online retail continued its post-pandemic momentum, underscoring the lasting strength of e-commerce.

The quarterly pattern broke convention. Incorporations peaked in Q3 at 219,000 before dropping more sharply than usual in Q4. The decline coincided with new director identity verification requirements introduced under the Economic Crime and Corporate Transparency Act—reforms designed to combat fraud and improve transparency.

Those rules appear to have tempered the pace of company formations, even as they strengthened the integrity of the business register. Darren Pirie, Head of Accelerator at NatWest, acknowledged the shift. “The UK’s entrepreneurial spirit remains strong, with active company numbers rising despite macroeconomic challenges. These figures show business owners are continuing to adapt and innovate. Small businesses drive growth across the UK, and NatWest is proud to support them to start and scale, which is why this year we’re expanding our free Accelerator five-fold to support 50,000 members.”

That expansion builds on results from the bank’s existing programme. Businesses completing NatWest’s Accelerator reported 104% year-on-year turnover growth, compared with 20% in a control group. Nine in ten remained trading after three years—far above the 56% average survival rate recorded by the Office for National Statistics for businesses born between 2017 and 2019.

Emma Jones CBE, the Small Business Commissioner, noted the resilience embedded in the figures. “It is good to see from this research that the number of overall active businesses is up, we are playing our part to ensure continued growth by getting money moving faster through the economy and into the hands of small firms. I have witnessed and experienced the challenges that businesses have faced in the past few years and have deep respect for founders who show resilience and continue to hire, export, and innovate. Long may they survive and thrive.”

Marka, a sustainability ratings startup spun out of Northumbria University, exemplified the regional activity in the North East. Robert Bowey and Chiara Wilson founded the company, which began trading in January 2025. It provides standardised sustainability ratings for the hospitality industry, allowing customers to choose suppliers based on environmental impact.

Bowey credited NatWest’s Newcastle Accelerator for critical early support. “The NatWest Accelerator has provided a focused environment and a supportive community that has been instrumental in helping us gain new skills and most importantly the opportunities to grow our business. As market disruptors, it can be difficult to find understanding from those who ran businesses in a different era. The NatWest team’s willingness to truly listen to our ambitions, opportunities, and flaws has been a refreshing change, not to mention the amazing community they’ve built here.”

The Index’s findings sit within NatWest’s broader Growing Together plan—a five-point strategy to back regional economies, support mid-market firms, strengthen infrastructure and housing foundations, improve financial confidence, and champion innovators.

Incorporation levels in 2025 remained above those recorded in 2021 and 2022, signalling stability after exceptional growth during the pandemic years. The modest year-on-year decline reflects a normalisation rather than a retreat.

Still, the sharper-than-expected Q4 drop raises questions about whether regulatory friction will persist. The new verification rules increased scrutiny on company formations—a deliberate trade-off between speed and integrity.

For now, the data suggests British founders continue to launch ventures despite economic headwinds, tighter regulations, and uncertain growth prospects. The shift toward software development and the emergence of the North East as a regional powerhouse hint at evolving patterns beneath the headline numbers.

Whether that momentum carries into 2026 will depend on how quickly founders adapt to the new compliance environment—and whether regional growth outside London can be sustained.