Portugal's Startup Slowdown Accelerates: Tech and Construction Lead While Traditional Sectors Struggle

The Portugal business formation sector slowed in the first quarter of 2026, recording a 5.9% drop in new company registrations compared to the same period last year—though this decline represents an improvement from the steeper 12% drops recorded in January and February. At the same time, insolvency filings ticked upward by 3.1%, with the construction and real estate sectors accounting for the lion's share of the increase. The data, compiled by Informa D&B from official Ministry of Justice records, underscores a cooling entrepreneurial climate but also reveals pockets of resilience in technology, business services, and renewable energy.

Why This Matters

• Fewer startups: 14,750 companies were incorporated between January and March 2026, 928 fewer than the same quarter in 2025.

• Insolvencies edge up: 531 businesses filed for insolvency in Q1 2026, a 3.1% year-on-year rise, reversing a downward trend observed throughout 2025.

• Construction and real estate under strain: Insolvency filings in construction climbed 27% (+15 cases), while real estate doubled (+11 cases).

• Closures down sharply: Provisional figures show 2,663 company closures in the quarter, a 33% drop compared to Q1 2025.

Tech, Construction, and Energy Buck the Trend

Despite the broader slowdown, four sectors posted net gains in new registrations during the first quarter. Information and communication technology companies led the charge with a 7.5% increase (+77 formations), followed by construction at 4.5% (+92 firms), business services at 2.2% (+58 firms), and energy and environment at 2.3% (+1 company). These sectors have exhibited consistent growth since 2020, with the exception of a brief dip in IT formations in 2023.

Construction has emerged as a particular bright spot. The sector's growth appears linked to public investment through the Portugal Recovery and Resilience Plan (PRR) and the Portugal 2030 framework, which are supporting infrastructure and housing development initiatives.

The technology and business services sectors continue to attract founders, reflecting sustained demand for digital solutions and professional consulting. The energy and environment category, while small in absolute terms, shows heightened interest in renewable energy ventures and sustainability-focused businesses.

Traditional Sectors Feel the Pinch

The sharpest declines in new formations were recorded in agriculture and livestock, ground transport, and food retail. Retail overall saw notable contractions, with accommodation and catering and transport services also experiencing significant downturns. These sectors—many of which are labor-intensive and operate on thin margins—have struggled with rising costs and sluggish consumer spending.

Accommodation and restaurant businesses, which boomed during the post-pandemic tourism rebound, now face saturation in urban markets such as Lisbon and Porto. The contraction in ground transport aligns with broader consolidation trends in logistics and ride-hailing, where scale and technology confer decisive advantages.

Geographic Divide: Vila Real and Angra Against the Grain

Geographically, the drop in business formation was nearly universal, with only Vila Real and Angra do Heroísmo recording increases. Lisbon (1,469 incorporations), Porto (801), Braga (379), Setúbal (369), and Faro (276) remained the top districts by volume, but all posted year-on-year declines. Coimbra, Viseu, and Portalegre managed modest upticks of 3%, 5.7%, and 0.7%, respectively, though the absolute numbers were small.

The contrast between the Azores and the mainland mirrors divergent economic pressures. Vila Real's uptick may reflect infrastructure investments tied to PRR-funded projects, while Angra's resilience could stem from its strategic role in Atlantic logistics and energy.

Insolvencies Rise, But Closures Drop Sharply

The 3.1% increase in insolvency filings in Q1 2026 marks a reversal of the downward trajectory seen throughout 2025, when Portugal logged a 4.4% annual decline in bankruptcies. The uptick was concentrated in fewer than half of all sectors, with construction and real estate driving the numbers.

Construction insolvencies climbed 27% (+15 cases), while real estate bankruptcies doubled (+11 cases). This trend contrasts with the sector's growth in new formations. The divergence suggests that established firms continue to operate while smaller players face pressures from rising material costs and labor challenges.

For context, over the 12 months ending March 2026, a total of 13,929 companies closed, down 12% year-on-year. Provisional Q1 data show 2,663 closures, a 33% drop compared to the same quarter in 2025. The decline was broad-based, with retail closures down 19% (−408 companies) standing out. However, non-specialized e-commerce retail saw 119 additional closures, a 270% spike, while footwear manufacturing recorded 40 more shutdowns, up 47%. Both subsectors are exposed to low-cost competition from Asia and shifting consumer preferences.

What This Means for Residents

For entrepreneurs and investors living in Portugal, the first-quarter data paint a nuanced picture. The overall decline in business formation does not signal a crisis, but it does suggest that the exceptional momentum of 2025—when 53,030 companies were registered, a record high—is unlikely to repeat in 2026. The sectors still growing (IT, construction, business services, energy) align with structural strengths in digital transformation, infrastructure renewal, and green transition.

Practical implications:

• Sectoral bets: If you're considering launching a startup, IT, renewable energy, and business consultancy offer favorable conditions. Agriculture, food retail, and traditional logistics face headwinds.

• Construction opportunities: The sector's dual trend—rising insolvencies but strong formation and growth—suggests that well-capitalized firms with access to PRR contracts are positioned favorably, while undercapitalized competitors face challenges.

• Insolvency risk: The uptick in bankruptcies in construction and real estate warrants caution for landlords, subcontractors, and lenders. Payment delays and defaults may escalate as weaker firms face difficulties.

• Outlook: The Q1 decline of 5.9% represents an improvement from the steeper contractions seen in January and February (12%), suggesting some stabilization as the quarter progressed.

Structural Factors at Play

The slowdown in business formation after a record 2025 reflects both cyclical and structural forces. Portugal's economy benefited from significant public investment and targeted support measures in 2024 and 2025. Those tailwinds are now moderating, contributing to the deceleration observed in Q1 2026.

Persistent structural challenges also weigh on entrepreneurial dynamism. Portugal's outsized share of micro and small enterprises, many of which operate at low productivity levels, contributes to underlying fragility. Challenges such as thin profit margins, rising labor costs, and difficulty attracting customers remain acute across the business landscape. Global uncertainty—geopolitical tensions, European slowdown, elevated interest rates—adds another layer of caution to entrepreneurial decisions.