Freshminds has released the results of a new survey which reveal what people consider to be the biggest reasons why 54 per cent of start-ups in the UK eventually fail within three years.

The survey found that 47 per cent of respondents believe the main reason for the high failure rate is ‘poor management and leadership’. This is followed by ‘insufficient funds or investment’ (35 per cent), ‘lack of planning’ (24 per cent), ‘inability of the business to differentiate itself from competitors’ (19%) and a ‘lack of innovation’ (19 per cent).

James Callander, managing director at Freshminds, said: “There is no one reason behind business failure, it is a combination of different factors. Despite this, entrepreneurs remain confident they can defy the odds and still grow a business that is profitable.”

Indeed, recent figures show that 660,000 new businesses were established in 2016 – up from 608,000 in 2015, making the UK one of the fastest-growing locations for start-ups in the world second only to the US.

“The introduction of government-sponsored initiatives, the rise of the alternative finance market, and global economic growth continuing at its highest rate since 2011 have encouraged many would-be entrepreneurs to set up their own businesses,” said Callander. “But as the results of our survey show, not everyone is cut out to be a business leader.

“We found that the ability to be an effective leader and manage people in the right way are the most critical factors that determine the success or failure of a business. We also find the best start-ups that we work with look to solve a genuine problem – and develop a product or service that solves that problem.

“Those start-ups that fail do so because the leadership team have failed to engage their teams, are often guilty of micromanaging employees, set unrealistic goals for the business, and demonstrate an over-enthusiasm. This more often than not leads to over-expansion which in turn results in poor execution of great ideas to the detriment of the business itself.”

He added that “the UK’s entrepreneurship culture should continue to be encouraged.” Entrepreneurs, he said, “play a critical role in creating new jobs and driving the economy forward.”

“However, the biggest investment new business owners must make – and the one that will deliver the greatest return – is the investment they make in themselves by learning and developing the leadership and management skills needed to run a successful business.

“It’s all very well having a great idea and the funds to bring your new product or service to market, but if you lack the ability to listen, learn and leverage your own skills and those of your teams, then the business will ultimately fail.

“It is not exactly rocket science, but to start a business in a growing market and broader market where you can sell and a deliver a product or service profitably, will support your growth.”