Amid high inflation and sluggish domestic demand, the number of businesses that closed last year reached 976,000. The closure rate in the six key sectors—accommodation, food, and retail, which are vital to the economy—significantly exceeded the overall average, indicating a critical situation for small businesses.
On June 30, the Ministry of SMEs and Startups released these findings through its "Analysis of Business Closure Statistics and Survey on Closed Small Businesses."
In 2025, the total number of business closures was 976,000, a decrease of 32,000 from the previous year (1,008,000). The closure rate was 8.64%, down from 9.04% the year before, showing a slight improvement.
However, the reality for small business owners was dire. The closure of businesses in the six key sectors reached 751,000, with a closure rate of 11.08%, far exceeding the overall average of 8.64%. This indicates that the burden of closures is heavily concentrated in small business sectors. Among different business structures, sole proprietorships had a closure rate of 9.06% (890,000), compared to 5.79% (85,000) for corporations.
The primary reason small business owners had to shut down was a decline in consumer sentiment. In a survey of 1,500 closed small business owners, 70.9% cited "deteriorating profitability and poor sales" as their reason for closing, followed by "personal circumstances such as family issues" (13.7%) and "retirement due to health or age" (12.1%).
The specific reasons for declining profitability and sales (multiple responses allowed) included a significant 62.5% citing "decreased customers due to sluggish domestic demand," confirming the prolonged downturn in domestic consumption. Other reasons included "increased raw material costs due to inflation" (29.4%), "rising labor costs" (28.8%), and "increased fixed costs such as rent and management fees" (24.9%). This reflects a vicious cycle where sales decline while costs continue to rise.
When deciding to close, 68.5% of respondents reported having debts, with an average debt amount of 85.31 million won. Specifically, they owed an average of 34.83 million won to first-tier financial institutions, 25.85 million won from loans guaranteed by local credit guarantee institutions, and 12.93 million won from second-tier financial institutions.
Choi Won-young, head of the Small Business Policy Office, stated, "It is the government's role to ensure that a single closure does not completely devastate a small business owner's life. We will establish a comprehensive support system that connects closure-related statistics to crisis diagnosis and alerts before closure, as well as support for recovery afterward." He added that plans are underway to hold both online and offline counseling sessions in major regions this second half of the year to assist small business owners facing management crises or closures.
As the small business sector faces collapse, discussions on next year's minimum wage, led by the Minimum Wage Commission, are adding further pressure on small business owners. The labor side has proposed a 16.3% increase to 12,000 won, up from this year's minimum wage of 10,320 won.
Conversely, the employer side is advocating for a freeze at 10,320 won, arguing that the current minimum wage exceeds 60% of the median wage, which is higher than the average of 49.3% among the G7 countries. In fact, the minimum wage has risen from 9,160 won in 2022 to 10,320 won this year, following increases in previous years.
* This article has been translated by AI.
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