Women founded a record number of businesses in 2023. Here’s why.

While entrepreneurship in the UK remains heavily skewed towards men, the number of women starting companies has never been higher.

In 2023, the UK saw more women founders than ever, following an unprecedented 164,000 incorporations at Companies House (the UK government’s company registrar), the highest number on record for a single calendar year.

This upward trend has been growing fast for several years, with 2023’s figure marking a 4% increase since 2022 and a 13% rise in 2021. In fact, the number of women founders has grown so fast in recent years that 2023’s total is more than double 2018’s figure – a veritable boom. Consequently, there are now 1.6 million female-owned businesses in the UK, 76% more than in 2003.

“This is [positive news], and [very much linked] to us seeing more funding options tailored to female-led start-ups,” says Tina McKenzie, Policy Chair of the Federation of Small Businesses. “Meanwhile, social media has also created new opportunities (i.e. Instagram making advertising cheaper) and work-from-home has given greater flexibility, [especially for women].”

Government start-up loans have indeed spurred growth for many female entrepreneurs. But to build on this momentum, the scheme must increase its reach from 11,000 to 15,000 recipients annually, allowing more women to benefit, says McKenzie. “As women’s impact grows, [we must give renewed focus to] the substantial obstacles still faced by women in business. A lot of work still needs to be done.”

Women remain highly underrepresented

While 2023 saw a record-high number of women founders, these accounted for just 18% of all new companies formed in the UK, given that 900,006 were created in total (another record-high for last year). This figure marks a decrease from 2021, when women accounted for 20% of the total.

In other words, women establish just 1 in 5 companies each year across the UK, a proportion that has remained unchanged in recent years. Despite the rapid growth in women founders over the last 5 years, the number of male founders continues to outpace women, routinely representing some 55% of total annual incorporations since 2021, according to an analysis of public data by 1st Formations.

Meanwhile, across the UK’s multi-billion pound venture capital market, female entrepreneurs routinely receive less than 2% of total annual investment. This figure was first brought to light by the landmark Alison Rose Review, which found that Britain could benefit from up to £250bn in new economic value if women in the UK started and scaled businesses at the same rate as men.

A huge part of the problem for women remains barriers to finance. For one, improving access to mortgages and other financial products for women-owned businesses is crucial, says McKenzie. Meanwhile, the Alison Rose Review found that ‘internal’ obstacles to finance, such as fear of rejection, stop 40% of women from applying, compared to 30% of their male counterparts. Better mentoring could also help, with 40% of self-employed women saying they would benefit from free or subsidised mentoring (compared to 28% of men).

“The glaring shortfall in affordable childcare leaves many, especially parents with multiple children under primary school age, questioning whether it is financially worthwhile to work at all, when they could save money by caring for the children themselves. A viable solution would be for the government to exempt independent nurseries from business rates in England, making childcare more affordable for parents,” explains McKenzie.

Adding to this, McKenzie argues that maternity allowance for self-employed mothers remains unfit for purpose. “The process is so complicated that some of our members have had to seek legal advice to ensure they’ve understood it correctly. Maternity allowance, and the level of support for new-self-employed mothers, needs a review.”

Sexism’s impact on the UK economy

As already shown, last year’s landmark figures for women founders are good news, but by no means a grand slam win for equality. There is also a darker side behind the determinants of this ongoing uptick.

“One of the main drivers for the rise in women founders has been the ascendence of flexible work, post-pandemic. It’s no secret that this led to a welcome rise in work-life balance and, in particular, gave both men and women the freedom to juggle different priorities at work and home,” explains Freddie-Nicolle Brace, Head of Legal at 1st Formations.

“[WFH] has had a disproportionately positive impact on women, given that they make up the majority of primary caregivers and homemakers in the UK, due to stereotypical and outdated gender roles. Women (in particular) have tasted what life is like if they have the freedom to work flexibly. This, combined with the fact that more and more employers are mandating a return to the office, has no doubt left evermore women questioning whether a fixed salary is worth the trade-off in work-life balance and well-being. Why not just start my own business? Many are now asking,” adds Brace.

As such, the backdrop to 2023’s landmark figure is one of systemic sexism across the UK, says Brace, who simultaneously applauds the new policy and advocacy initiatives that are better supporting women in business. There is clearly a balance to be struck between ensuring equality at the workplace (and at home) and encouraging more women to become founders.

“It remains brilliant to see more women than ever putting their entrepreneurial skills to use, something that will no doubt have much-needed knock-on effects on the SME industry, such as improving diversity and access to underrepresented perspectives,” says Brace. “But suppose we fail to treat the underlying causes behind gender inequality in the UK economy. In that case, the obstacles women face as founders will remain in place under a new guise,” concludes Brace, pointing to the huge funding gap for women startups, as an example.

“It remains the case that the majority of investors in the UK are male,” says Laura Bennett, Head of the Enterprise Hub at the Royal Academy of Engineering. “As such, they’re often less tuned into some of the solutions, services, and products that female founders are bringing to the table. This is very well documented.”

“Much of the issues here have their roots in education,” adds Bennett, adding how just 1 in 4 women undertake a STEM degree at a university in the UK.