According to Barclays' quarterly Start-ups and Closures report, 465,000 new companies were set up in 2003, the highest level since the bank's first report in 1988.
The figure was also a 20% improvement on 2002 when 391,000 new start-ups were created.
Business owners were encouraged by "benign economic conditions and a strengthening of entrepreneurial spirit," the report said.
The leisure industry showed the strongest rate of growth rising by 48% suggesting that many entrepreneurs are exploiting the UK's health craze and setting up their own sports clubs and personal training businesses.
Motor trades were also popular with a 43% increase.
But there was bad news for the UK's hospitality industry. The hotels and catering sector performed the worst with a 28% drop in start-ups.
