Record High Closures Hit South Korea's Self-employed Sector

In a startling revelation, the Korea Enterprises Federation reported on December 26 that 986,000 self-employed individuals closed their businesses in 2023, marking the highest number since records began in 2006. This surge in closures underscores the severe economic challenges confronting small business owners across South Korea.

Understanding the Closure Rate Surge

The comprehensive survey, encompassing 9,950,000 businesses, indicated a closure rate of 9% last year, a 0.8 percentage point increase from 2022. This rise, the first in seven years, means one in ten businesses failed, surpassing the 922,000 closures recorded during the COVID-19 pandemic in 2020. Individual businesses bore the brunt, accounting for 92.3% of the closures.

Why Businesses Are Closing

Nearly half of the closures (48.9%) were attributed to a 'business downturn', the highest proportion since 2010. Other reasons included miscellaneous factors (45.7%), transfer or sale of the business (4%), and corporate conversion (0.5%).

The Impact on the Younger Generation

A particularly alarming trend is the high closure rate among the 2030 generation, with around 290,000 young entrepreneurs shutting down their ventures. The closure rate for those under 30 soared to 19.8%, indicating that one in five business owners in their 20s failed.

Industry-wise Closure Rates

Last year, the food and retail sectors experienced the highest closure rates, at 16.2% and 15.9% respectively. The accommodation industry also suffered, with a non-compliance rate with minimum wage laws reaching 37.3%.

Looking Ahead

The Korea Enterprises Federation highlighted the need for supportive measures to foster entrepreneurship, enhance 're-startup' foundations, and improve the business environment. They emphasized the importance of establishing a labor, tax, and regulatory framework that aligns with global standards to ensure long-term economic vitality.