SEOUL, July 06 (AJP) -South Korea saw nearly 84 business closures for every 100 new business registrations last year, the highest ratio in 12 years, reflecting a sharp slowdown in entrepreneurship amid a prolonged economic downturn.
A record 317,406 businesses that had operated for five years or more shut down last year, accounting for 32.5 percent of all closures.
More than half cited sluggish business conditions as the reason for closing, the highest share since 2009 in the aftermath of the global financial crisis.
The number of active food service businesses fell 1.9 percent from a year earlier to 798,969 at the end of 2025, dropping below the 800,000 mark, according to National Tax Service data released Monday.
New openings in the sector fell 13.6 percent to 130,114, the steepest decline since comparable data began in 2011.
Closures totaled 142,557, exceeding new openings and leaving the sector with a net decline of 12,443 businesses, five times larger than the previous year’s decrease of 2,491.
The decline was concentrated among restaurants that had survived for years.
A total of 41,659 restaurants that had operated for at least five years shut down last year, the largest number since comparable data began in 2007.
Restaurants with more than 20 years of operation also posted a record 2,797 closures, up 61 percent from 2021.
Across all industries, the number of active businesses stood at 10.32 million at the end of last year, up 1.7 percent from a year earlier, the slowest growth since comparable data began in 2005.
New businesses fell 4.1 percent to 1.17 million, extending their decline for a fifth consecutive year and marking the lowest level since 2014.
Closures declined 3.2 percent to 975,681 after exceeding 1 million for the first time in 2024, but the ratio of closures to new openings rose to 83.5 percent, the highest since 2013.
Separate industrial data showed a similar gap between the broader service-sector recovery and conditions facing restaurants.
Accommodation and food service output rose 0.9 percent on-year in the first five months of 2026, compared with a 4.2 percent increase in overall service output, according to KOSIS and industrial activity data.
Within the sector, accommodation output rose 2.7 percent, while restaurants and bars increased just 0.6 percent.
Self-employed borrowers’ loans from financial institutions stood at 1,095.5 trillion won at the end of the first quarter, the largest amount since related data began in 2012, according to Bank of Korea data submitted to Rep. Park Sung-hoon.
Overdue loans reached 22.3 trillion won, up 2 trillion won from the end of 2025 and also the largest on record, while the delinquency rate rose to 2.04 percent, the highest since the second quarter of 2015.
Korea Credit Data said total loans held by individual business owners stood at 732.2 trillion won in the first quarter, up 3 trillion won from the previous quarter, while delinquent loans rose 12.6 percent to 14.6 trillion won.
Of the 3.608 million individual business owners with loans, 501,000, or 13.9 percent, were classified as closed businesses, according to KCD.
KCD also said average sales per individual business establishment rose 1.89 percent from a year earlier to 42.58 million won in the first quarter, while average costs increased 3.36 percent to 32.59 million won.
Profit, measured as sales minus costs, fell 2.63 percent to 9.99 million won, and the operating margin declined 1.09 percentage points to 23.5 percent.
The Bank of Korea said in its June Financial Stability Report that loans to self-employed borrowers accounted for 28.5 percent of all financial-sector loans at the end of the first quarter.
The central bank said risks in the self-employed sector were concentrated among small-scale businesses, face-to-face service operators, real estate-related borrowers, older self-employed borrowers and vulnerable borrowers.
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