Are Company Insolvencies on the Rise in the UK?

In uncertain economic times, many businesses face financial distress. Understanding the current trends and causes of company insolvency can help owners act before it’s too late.

Company Insolvencies in England and Wales

Key Insights:

• In May 2025, there were 2,238 company insolvencies, up 15% year-on-year and 8% higher than April 2025.
• In June 2025, insolvencies dipped to 2,043, still 16% higher than June 2024, but 8% lower than May 2025.
• For the 12 months to June 2025, the insolvency rate was 52.4 per 10,000 companies (~1 in 191), down from 55.8 per 10,000 the year before.
• Total company insolvencies in 2024 reached 23,872, a 5% decrease from 2023, the highest year on record.

Source: Company Insolvencies, May 2025 – GOV.UK

Industry Breakdown

• Creditors’ Voluntary Liquidations (CVLs) accounted for 78% of all insolvencies in June 2025 (~1,585 cases).
• Other insolvency types included:
  • 332 compulsory liquidations
  • 111 administrations
  • 15 CVAs (Company Voluntary Arrangements)

What Sectors Are Most Affected By Insolvencies?

Certain sectors have been disproportionately affected by insolvencies, with ongoing challenges in both operational costs and demand. Below is an analysis of the sectors most affected:

Construction

The construction industry has been one of the hardest-hit sectors, with rising material costs and labour shortages adding significant financial pressure. Project delays and Brexit-related supply chain issues continue to exacerbate challenges for businesses trying to stay profitable.

Key Challenges:

• Rising building material costs (e.g., timber, steel) have inflated project expenses.

• Labour shortages and skills gaps have slowed down construction timelines and increased costs.

• Brexit-related supply chain issues have caused delays and inflated prices for imported materials.

Wholesale & Retail

The wholesale and retail sectors are under pressure due to supply chain disruptions and decreasing consumer confidence. Retailers are struggling with higher operational costs and challenges in maintaining inventory and meeting shifting demand.

Key Challenges:

• Supply chain disruptions and consumer demand fluctuations have severely impacted sales and margins.
• Rising operational costs, from wages to logistics, have eroded profitability in both sectors.

Accommodation & Food Services

The accommodation and food services sector is facing difficulties in recovery, with high energy prices and fluctuating consumer demand. Staffing shortages and rising operational costs have made it harder for businesses to stay afloat in an ever-changing market.

Key Challenges:

• High energy prices and fluctuating demand have placed significant strain on profit margins.
• Staffing shortages and increased operational costs are ongoing issues for businesses in hospitality.

Trend Comparison: Pre‑COVID vs Post‑COVID Insolvencies

Pre-COVID (2019) Insolvency Trends:

• Insolvencies rose by ~10% annually in 2019.

• Total Insolvencies: Around 20,000 businesses.

• Economic Pressure: Rising operational costs, business debt, and other economic factors.

2020-2021: Lockdown Support & Record Low Insolvencies:

• Government interventions such as furlough schemes and loan support helped reduce insolvency filings to record lows during the pandemic.

• Business closures were avoided due to temporary financial relief.

2023: Insolvency Rates Hit a 30-Year High:

• Insolvency rates surged in 2023, hitting the highest level in 30 years as government support ended and businesses faced inflation, rising energy costs, and supply chain disruptions.

2024–2025: Slight Decline but Above Pre-Pandemic Levels:

• Insolvencies in 2024-2025 show a slight decline compared to 2023 but remain above pre-pandemic levels due to continued economic challenges.

Causes of Insolvency in 2024–2025

• Inflation & Rising Costs: Higher wages, energy bills, and tax burdens reduce profitability.
• Supply Chain Disruptions: Trade frictions and delivery delays strain operations.
• Low Consumer Confidence: Retail and leisure sectors hit hard by reduced demand.
• Tax-Driven Voluntary Closures: Directors choosing liquidation to maximise tax relief.

The Role of HMRC and Regulatory Factors

• HMRC Preferential Creditor Status: Reduces returns for other unsecured creditors.
• Corporate Insolvency and Governance Act 2020: Introduced tools like moratoriums and restructuring plans—but uptake remains low.

Outlook for the Future

• Insolvency rates may remain elevated if inflation and confidence issues persist.
• Larger company failures may lead to supply chain domino effects.
• There’s a growing opportunity for turnaround through restructuring rather than liquidation.

Key Takeaways

• Insolvency remains above pre-COVID levels, though 2024 saw slight easing.
• CVLs dominate, but compulsory liquidations and administrations are increasing.
• Economic pressures (energy, wages, tax) are key contributors in 2025.
• HMRC’s status and underused restructuring tools may hinder business recovery.

What You Can Do

If your business is showing signs of financial distress, don’t delay:

• Review your cash flow, liabilities, and sector exposure.
• Explore solutions like debt rescue, liquidation, or an IVA.

If your business is showing signs of distress, speak to a licensed insolvency expert at Irwin Insolvency today.

Get Expert Help

For confidential support from experienced professionals, contact Irwin Insolvency:

Call: 0800 254 5122 or Message us: Contact Form

Sources

1. 1. 1. UK Government – Insolvency Statistics:
         https://www.gov.uk/government/organisations/insolvency-service
      2. The Gazette – Company Insolvency Trends, June 2025
         https://www.thegazette.co.uk/all-notices/content/104394
      3. The Gazette – Sector-Based Insolvency Overview
         https://www.thegazette.co.uk/insolvency/content/104319
      4. BHSI & RPC – COVID-19 and UK Insolvency Trends Report (PDF)
         https://www.bhspecialty.com/wp-content/uploads/2022/04/BHSI_RPC_COVID-19-and-the-Impact-on-UK-Corporate-Insolvencies_4-18.pdf
      5. PwC – UK Restructuring Insights
         https://www.pwc.co.uk/services/business-restructuring/insights/restructuring-insights.html
      6. Financial Times – Inflation and Insolvency Pressures
         https://www.ft.com/content/857846eb-edb0-4ea4-8483-eca6d59611e8
      7. Creditsafe – Business Insolvency Trends Blog
         https://www.creditsafe.com/gb/en/blog/reports/insolvencies.html
      8. The Guardian – UK Business Live Updates
         https://www.theguardian.com/business/live/2025/jun/20/uk-government-borrowing-retail-sales-slide-may-stock-markets-oil-business-live-news-updates
      9. Wikipedia – Corporate Insolvency and Governance Act 2020 https://en.wikipedia.org/wiki/Corporate_Insolvency_and_Governance_Act_2020
      10. The Guardian – UK Insolvency & Economic Forecast, July 2025
          https://www.theguardian.com/business/live/2025/jul/18/china-resumption-nvidia-h20-ai-chip-sales-japan-tariff-warning-uk-insolvency-business-live-news-updates