creditcontrol.co.uk
Creditors getting restive as UK insolvencies rise
UK businesses have been through a lot of stress in recent years, battling against the pandemic, the ripple effects of the Ukraine war, rampant inflation and soaring interest rates. Now a new series of shocks is rattling their already battered cages, as they face up to the realities of the Autumn 2024 Budget cost hikes and savage public spending cuts in the Chancellor’s Spring Statement.
So, what would be the last thing they need next? A global trade war as America executes a bizarre dance of policy hokey pokey (as it calls the hokey cokey) with import tariffs. The resultant uncertainty is a serious threat to the overall UK economy and to its gallant entrepreneurs.
To understand just how fragile the business community is and how this might all play out in terms of business failures, we turned to Nick Hood, Senior Adviser at Opus Business Advisory Group for a view from the insolvency coal face.
“The latest data on corporate insolvencies from the Insolvency Service covers the month of March 2025. Two caveats are that much of the media comment on these statistics has been inaccurate because it has covered only England and Wales, somehow ignoring Scotland and Northern Ireland; equally, pundits inexplicably choose to look at the ‘seasonally adjusted’ numbers which distort the true picture. To get proper comparability with past data and for the whole of the UK, the only true analysis should cover non-seasonally adjusted statistics.”
“On this basis, March saw 2,225 insolvencies, a rise of 15.5% on the same month last year. This figure was also 10.8% higher than February 2025 and 9% up compared to January 2025. It seems we have what looks very much like the start of a sustained upward trend. Not a startling one, but significant nonetheless.”
“Looking at the less volatile statistic of the rolling 12-month total, March 2025 gives a number of 25,649 against 26,521 in March 2024 (3.3% lower now) and the all-time peak of 27,182 in February 2024 (5.6% down now). Although these figures are lower, if March’s individual monthly rise continues, it won’t take long before we are pushing up to and beyond the previous peak.”
“The one striking feature of the latest statistics is a clear surge in Compulsory Liquidations (CWUs), the creditor-instigated route to the end of a company’s life. There were 1,085 CWUs in Q1 2025, compared to only 934 in Q1 2024, a jump of 16% and a clear indication that creditors (in particular HMRC) are more prepared and determined to go down the Winding Up Petition avenue for debt enforcement. This is not good news for struggling businesses, dealing with cash flow problems.”
“By contrast, the rapid growth in the alternative exit route of a director-driven Creditor’s Voluntary Liquidation (CVL) which was such a strong characteristic of the growth in insolvencies from mid-2023 to the summer of 2024 seems to be running out of steam. A comparison with CWUs highlights this. CVLs in Q1 2025 totalled 4,721 as against 4,638 in Q1 2024, a rise of only 2%, rather than the 16% growth in CWUs in the same period.”
“A final consideration is whether the sectors worst affected by the Autumn Budget cost increases such as hospitality and retail are seeing any noticeable uplift in insolvencies. The answer is a resounding ‘No’. The latest industry analysis is up to February 2025 and for England and Wales only, but the outcome is clear.”
“Hospitality failures have averaged 273 a month since the Autumn Budget, compared to 323 a month in the same period in 2023/24 and 300 a month in the 12 months up to the Budget. For retail the picture is similar. Insolvencies have been 147 a month since the Budget, whereas they were 178 a month in the same months in 2023/24 and 170 a month in the 12 months up to the Budget. Far from rising, insolvencies in both sectors have fallen substantially.”
“The explanation may well be nothing to do with the Budget cost hikes, which only came into practical effect at the beginning of April. What was happening throughout 2023 and much of 2024 was the cost-of-living crisis negatively affecting the ability and/or willingness of customers to spend, so that lower revenues were driving marginal consumer-facing businesses over the edge.”
“The Budget’s impact is yet to come, with insolvencies probably rising later in 2025 and through into 2026. Quite how badly the Trump tariff turmoil will eventually affect UK insolvencies is a puzzle for crystal ball gazers, but the outcome is unlikely to be a happy one.”