By Daniel Hunters

More than half (55%) of the small and medium-sized businesses set up in the UK don't last more than five years, according to new research by commercial insurance firm RSA.

The Growing Pains study revealed a downward trend in the survival rate of businesses between one and five years old since 2004. Despite a recent improvement in economic conditions, survival rates remain lower than before the financial crisis.

The construction has been the worst hit, with just 44% of SMEs surviving past five years. The health sector was a relatively close second with a survival rate of 56%.

David Swigciski, SME Trading Director at RSA, said: “The UK is a great place to start a business, but our research reveals that survival rates are low. The recession has had an unsteadying effect on SMEs and we need to work hard to rebuild their confidence.”

The research also identified the barriers to growth currently impacting on SMEs. Sixty-three percent of those surveyed said they struggle to grow the business. But that figures rises to 80% in London and the South East and 75% in Scotland.

The UK tax system was the most cited concern (44%), closely followed by a lack of bank lending (38%), too much red tape (36%), the cost of running a business (36%) and late payments or cashflow (35%) were the largest barriers to growth.

Mr Swigciski added: “The UK economy relies on a balance between start-ups and high-growth businesses, but our research reveals a worrying imbalance and there remain major barriers to achieving growth. Now is the time for the Government to understand what’s really holding small businesses back and to ensure that they are coming up with the right incentives to drive growth and give businesses confidence.

“Unfortunately, Government focus doesn’t guarantee outcomes. For example, despite the Funding for Lending scheme, net lending to SMEs continues to fall, with approximately 50% of SMEs making a first-time borrowing enquiry being rejected.”

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