South Korea’s business formation slowed to its weakest pace on record in 2025, as fewer entrepreneurs entered the market and a rising number of long-established firms shut down, signaling growing strain across the country’s small-business sector.
According to National Tax Service data released on July 6, the number of active business operators stood at 10.321 million as of December 31, up just 1.7% from a year earlier—the slowest growth rate since comparable statistics began in 2005.
The slowdown was driven primarily by a continued decline in new business creation. New business registrations fell 4.1% to 1.168 million, marking the fifth consecutive annual decline and the lowest level since 2014.
At the same time, closures remained elevated. A total of 975,681 businesses shut down in 2025, down 3.2% from a year earlier but still historically high. The ratio of new businesses to closures rose to 83.5%, meaning that for every 100 new businesses, 83.5 were closed—the highest level in 12 years.
While total closures declined slightly, underlying weakness deepened. Businesses that had operated for at least five years accounted for a growing share of shutdowns, with 317,406 long-established firms closing in 2025—the highest level since comparable data began in 2005. Their share of total closures rose to 32.5%, meaning roughly one in three businesses that closed had survived at least five years.
Business deterioration remained the dominant reason for shutdowns, accounting for 491,966 cases, or 50.4% of all closures, the highest share since the 2009 global financial crisis.
The weakness was especially pronounced in the restaurant sector, a key indicator of conditions for South Korea’s self-employed workers. Active food-service businesses fell 1.9% to 798,969, slipping below the 800,000 mark.
New restaurant openings dropped 13.6% to 130,114, the steepest decline since comparable data began in 2011. Closures exceeded new openings, resulting in a net loss of 12,443 businesses, about five times the decline recorded a year earlier.
Long-established restaurants were particularly affected. Closures among businesses operating for more than five years reached 41,659, the highest on record, while shutdowns of restaurants operating for more than 20 years rose to 2,797, up 61% from 2021.
The downturn comes as stress spreads through South Korea’s broader retail and service sectors. Homeplus, once the country’s second-largest hypermarket operator with more than 140 stores nationwide, has entered a court-led restructuring process that was recently terminated, raising the prospect of liquidation.
The potential collapse has prompted concerns over ripple effects on employees, franchise operators, and suppliers.
In response, the government has rolled out emergency liquidity support for affected small and mid-sized suppliers, including roughly $320 million in low-interest loans and credit guarantees from policy lenders. It has also expanded support limits for small businesses to about $73,000 and lowered interest rates by 0.5 percentage points to ease financial pressure.
