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2024 saw business failures fall, but there's trouble ahead

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With the dust settling on a real game of two economic halves for the UK in 2024, figures published by the Insolvency Service have confirmed that there were fewer corporate insolvency filings than in 2023, down overall by 5%.  The figure of 25,421 failures for the year was even lower than the all-time peak of 27,188 for a rolling 12-month period, a drop of 9% compared to July 2024.


Within these overall statistics, the standout feature has been the surge in Compulsory Winding Up liquidations (CWUs) caused by creditor enforcement action through the courts.  At the other end of the formal insolvency scale, attempted business rescues using the Administration process are also rising, though more modestly, and are beginning to head back up to pre-pandemic levels.

Hoping to gain an insight into where insolvency trends for struggling businesses might be heading in 2025, we asked Nick Hood, Senior Adviser at the Opus Business Advisory Group to peer into his crystal ball.

“The CWU statistics tell the story of a creditor community grown weary of treading gently in collecting overdue debts, an understandable attitude after the long years during the pandemic when the government effectively banned the use of almost all creditor enforcement mechanisms in its efforts to prevent viable businesses going under during the gross commercial disruption caused by Covid 19.  The dominant player in driving CWUs is HMRC.”

“No insolvency process is pleasant, but undergoing a CWU will have been at the extreme edge of chastening commercial experiences for the Directors of the 3,863 companies that went into Compulsory Liquidation in 2024.  This number was 16% higher than in 2023 and 72% higher than in 2022 when creditor restrictions were still in force for the first quarter.  The 2024 total has even beaten the immediate pre-pandemic total in 2019, although only just.”

“Business rescue may just be coming back into some sort of fashion, although only marginally so.  Administrations edged up in 2024 compared to 2023 (by 5%) after a dramatic reduction during the pandemic years of 2020 to 2022.  Nevertheless, they have some way to go to get back to 2019, which was 12% higher than 2024.  Company Voluntary Arrangements (CVAs) are also rising, but the absolute numbers are too small to be significant.”

“A major driver for increased rescue activity may be the rush by private equity and other venture capital investors to weed out underperformers from their portfolios as their own investors move into other asset classes.”

“Moving on to the prospects for 2025, the potential damage to the viability of businesses from the October Budget measures coming into force in April has been shouted from the rooftops by the government’s political opponents and by a wide range of business lobby groups, such as the CBI, the British Retail Consortium and UKHospitality.”

“The background to the cost increases themselves is the impact of the government’s campaign of expectation management aimed at making the public aware of its extremely poor financial inheritance from previous governments, the alleged £40 billion ‘black hole’.  This and the furore following the Budget appears to have taken both business and consumer confidence to unhealthily low levels.”

“There is little doubt that the greatest pressures this year will fall on labour-intensive businesses dependent on consumer spending, specifically hospitality, retail and other forms of leisure and particularly on smaller and more vulnerable companies in those sectors.  Unsurprisingly, hospitality (15%) and retail (8%) are two of the top five industries in terms of the share of overall insolvencies.  Only construction has a higher incidence of failures at 17% of the total.”

“The Budget and confidence threats are known factors already likely to reverse the downward trend of insolvencies in 2025.  The wild cards are the great known unknowns: the possibility of significant tariffs being imposed by the newly installed 47th American President and other geopolitical risks.”

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