Record Number of Self-Employed Individuals Cease Business in Czechia

In 2023, the Czech Republic witnessed a record-breaking 277,000 self-employed individuals terminating their businesses, marking the highest number since 1993, according to data from Imper.

The trend is attributed to economic uncertainties, escalating costs and increased administrative requirements such as mandatory data boxes.

Despite 68,000 entrepreneurs registering anew, mirroring the figures from 2022, the overall termination of businesses reflects a challenging economic environment.

Last year, 14,000 limited liability companies and 4,703 foreign individuals ceased to exist. Associations that ceased to exist were 3,424, and individuals engaged in agriculture also significantly felt the impact with 2,836 entities ending their activities, a notable increase from 812 in 2022

The termination of businesses in 2023 almost matched the previous record set in 1993 when over 278,000 self-employed individuals ended their businesses.

Factors contributing to this record include the dissolution of Czechoslovakia and the legislative prohibition of the “black system,” effective from that year onwards. Throughout the years, the number of terminated businesses varied in the tens of thousands, with exceptions like 2013 when nearly 150,000 self-employed individuals ceased their activities and the post-COVID year 2022.

Tomáš Berger, the director of Imper, pointed out that the peak termination of activities occurred during February and March, coinciding with the introduction of the new obligation of the data box by the state.

This requirement likely served as a significant factor prompting many self-employed individuals to definitively terminate their activities.

Challenges were particularly notable in the restaurant sector with almost 22,000 closures, a significant surge from the previous year’s 6,209 closures. Masonry and locksmithing/toolmaking also experienced notable closures.

While January, was the preferred month to establish new companies, with 115,000 founded in total, entrepreneurs initiated businesses relatively evenly throughout the year.

Prague saw the highest number of new companies, followed by Brno and Ostrava, while Pardubice, Hradec Králové and Ústí nad Labem recorded fewer new businesses.

The breakdown of newly established companies showed that nearly 60 percent were self-employed individuals, followed by 24 percent limited liability companies, similar to the figures from 2022. Associations, communities of unit owners, joint-stock companies and endowment funds were also among the newly formed entities.