A closure notice is posted on a storefront in Jongno-gu, Seoul. [Herald DB]
A closure notice is posted on a storefront in Jongno-gu, Seoul. [Herald DB]

Fewer new businesses are opening and more long-running ones are shutting down, pushing the growth rate of active businesses last year to the lowest level since records began. Closures were most concentrated among businesses that had operated for five years or more — including restaurants open for over two decades.

National Tax Service statistics show that as of Dec. 31 last year, the number of active businesses stood at about 10.32 million. That represented a year-on-year increase of just 1.7% — the lowest growth rate recorded since 2005, the earliest year available on the National Tax Statistics Portal.

Active businesses are defined as those that continue operating after registering with tax authorities. The growth rate peaked at 7.5% in 2020, up from 4.9% in 2019, before declining steadily: 6.4% in 2021, 5.1% in 2022, 2.8% in 2023 and 2.0% in 2024, before falling below 2% last year.

The slowdown appears to reflect a drop in new business formation. New registrations fell 4.1% from the previous year to about 1.17 million last year, marking a fifth consecutive annual decline and the lowest figure since 2014, when about 1.13 million new businesses were registered.

Closures totaled about 975,000 last year, down 3.2% from 2024, when the figure exceeded 1 million for the first time. The decline in closures, however, was not enough to arrest the broader slowdown in active business growth.

The ratio of closures to new registrations reached 83.5% last year — meaning roughly 83 businesses closed for every 100 that opened. That was the highest such ratio since 2013, when it stood at 84.0%.

Some 317,406 businesses that had survived for five years or more closed last year, the highest number since comparable records began in 2005. They accounted for 32.5% of all closures — one in three businesses that shut down. The share has risen for five consecutive years since 2020, when it stood at 27.1%, setting a new record each year.

Among the reasons cited for closure, "poor business performance" was the most common, accounting for 491,966 closures, or 50.4% of the total — the highest share since 2009, the year of the global financial crisis, when it reached 54.9%.

The food service sector showed the sharpest deterioration. Active food service businesses fell 1.9% from the previous year to 798,969 last year, dropping below the 800,000 mark. New restaurant openings totaled 130,114, down 13.6% — or about 20,412 — from the year before, the steepest annual decline since comparable data became available in 2011.

With closures at 142,557 outpacing new openings, the net decline in food service businesses widened to 12,443 — roughly five times the previous year's net loss of 2,491. A net decrease has occurred only twice in the comparable data series: in 2024 and last year.

Long-established restaurants bore the brunt of the closures. Some 41,659 food service businesses that had operated for five years or more shut down last year, the most since comparable data became available in 2007. Among them, 2,797 had been in operation for 20 years or more — also a record high and a 61 percent increase from 2021, when 1,738 such establishments closed.

A court decision to terminate Homeplus's court-led rehabilitation process is expected to add further pressure on the self-employed sector. A final bankruptcy ruling could inflict widespread damage on directly and indirectly employed workers, store operators within Homeplus locations, and suppliers across the supply chain.

A Homeplus store in central Seoul. [Herald DB]
A Homeplus store in central Seoul. [Herald DB]

soho0902@heraldcorp.com