Three to four out of 10 new businesses close within a year

Among newly founded companies, three to four out of 10 go out of business within just one year in South Korea. While half of the active companies are small businesses with annual sales of less than 50 million won ($38,400), the number of “gazelle companies” that have grown by an average of over 20 percent for three consecutive years soared to a record high, highlighting a severe polarization in the nation’s new business landscape.

According to statistics released by Statistics Korea on Thursday, the number of companies active in the country in 2022 was 7,353,000, an increase of 3.4 percent from the previous year. The number of new businesses totaled 997,000, down by 3.5 percent compared to the previous year, while the number of disappearing companies was 735,000, down by 4.3 percent. Although the number of newly formed companies decreased, the decrease in the number of companies that closed was greater, resulting in an overall increase in active companies.

The number of new businesses has been on a downward trend for two years in a row, following a trend that started in 2021. By industry, the number of new businesses in the real estate industry decreased by 32,000, while decreasing by 8,000 in the manufacturing industry and 5,000 in the construction industry. The new business rate, which represents the ratio of new businesses to active businesses, was 13.6 percent, the lowest since the statistics were first compiled in 2011.

The survival rate of new businesses founded in 2020 after one year was 64.1 percent, a 0.6 percent decrease from the previous year. In contrast, the survival rate of new businesses over a period of 5 years increased by 0.5 percent. The survival rate of businesses founded in 2016 until 2021 stood at 34.3 percent.

High-growth companies, which have more than 10 regular employees and have seen an annual increase of over 20 percent and regular employees over the past three years, increased by 10.8 percent to 5,543 compared to the previous year, the highest since statistics were first compiled. By industry, high-growth companies were most abundant in manufacturing with 1,386 companies, information and communications with 810 companies, and wholesale and retail with 788.

Among high-growth companies, gazelle companies, or companies that have had their business registration for less than five years, hit a record high of 1,467, a 5.7 percent increase from the previous year.