Number of Business Closures Surpasses One Million for the First Time... Retail and Restaurant Sectors Hit Hard

Half of Business Closures in Retail and Restaurants
Retail Sector Sees Highest Closure Rate in 11 Years

For the first time, the number of business owners who filed for closure last year exceeded one million. Nearly half of all closures occurred in the retail and restaurant sectors, where many self-employed individuals are concentrated, reflecting the direct impact of the domestic economic downturn.

According to the National Tax Service's statistics released on the 6th, a total of 1,008,282 individual and corporate business owners reported closures last year. This is the first time since related statistics began in 1995 that the number of closures has surpassed one million. The figure increased by 21,795 compared to the previous year (986,487).

The number of closures had been on a downward trend, falling from 922,159 in 2019 to 867,292 in 2022. However, as the impact of reduced consumer spending due to COVID-19 and continued high interest rates accumulated, the number surged by more than 110,000 in 2023, and the upward trend continued for a second consecutive year last year.

The closure rate also rose last year. The closure rate, which represents the ratio of closures to the total number of businesses, was 9.04%, a slight increase from 9.02% the previous year. This means that nearly one in ten businesses operating last year shut down.

Industries vulnerable to economic fluctuations led the increase in closures. By sector, 299,642 closures occurred in retail alone, accounting for 29.7% of the total. Restaurant closures made up 15.2%. Combined, these two sectors represented about 45% of all closures.

Real estate (11.1%) and wholesale and goods brokerage (7.1%) also accounted for significant proportions, while the construction sector saw 49,584 closures (4.9%) due to the slump in the construction market.

'Business downturn' was cited as the reason for closure in more than half of cases. The number of business owners who closed due to poor business performance was 506,198, accounting for 50.2% of the total. Closures due to business downturn increased by more than 24,000 last year, surpassing 500,000 for the first time. This is the first time since 2010, immediately after the global financial crisis, that the proportion of closures due to business downturn has exceeded half.

'Other' reasons followed with 449,240 cases, followed by transfer/acquisition (40,123), conversion to corporation (4,471), administrative disposition (3,998), dissolution/merger (2,829), and seasonal business (1,089).

The closure rate by industry was also pronounced in sectors with high concentrations of self-employed individuals. The closure rate for retail was 16.78%, the highest in 11 years since 2013. Restaurants (15.82%) and personal service sectors (14.11%) also ranked high in closure rates.