The report from Barclays Bank reveals 116,300 new firms were set up in the first three months of 2005, compared to 129,500 over the same period in 2004. The bank expects an uneasy attitude toward starting up to persist for the rest of the year.
Despite the slip in numbers, the number of new businesses are still 15% higher than average for this time of year, Barclays reports. The average number in any quarter is 99,000.
The report predicts start-up figures to total 430,000 at year-end, a decline of 30,000 over 2004, and blames the decline on the consumer spending slowdown and uncertainty over the housing market.
Meanwhile, a coinciding survey finds that the country's economic woes are also leading to significant rises in firms closing down.
An analysis of Department of Trade & Industry insolvency statistics by BDO Stoy Hayward predicts that the number of small business failures over the next two years will rise steadily.
The slowing economy, it said, is leading to a 3% increase in failing businesses this year and an expected 5% further increase in 2006.
An average of 315 firms fail each week in the UK, according to the report, largely in the retail and leisure sectors. It estimated retail business failures will increase by 23% by the end of this year with expected interest rate cuts to ease the situation in 2006.
"UK businesses are facing a difficult combination of circumstances as slower economic growth, higher interest rates and increased inflation raise the pressure," said Shay Bannon, business restructuring partner at BD Stoy Hayward.
"Even in 2007, when the economy is forecast to grow by just 2.1%, the number of business failures will be lower than in 2003."
