creditcontrol.co.uk
Insolvencies static despite business-bashing budget
It seems that Autumn is not just the season of mists and mellow fruitfulness, as Keats so lyrically described it. It’s also a time for making life difficult for businesses with the Chancellor dumping huge amounts of extra costs into their financial models, threatening both profitability and viability. Yet, 14 months on from the announcement of the first dollop of bitter fiscal medicine in October 2024, business failures are no higher, despite the dire warnings of disaster especially from the labour-intensive sectors worst affected, such as hospitality, leisure and retail.
We now have the corporate insolvency statistics for the full calendar year 2025 which showed that on a non-seasonally adjusted basis across the whole of the UK, 25,526 companies filed for insolvency. This is almost exactly the same as in 2024, when the figure was 25,421. Both years are lower than the all-time high of 26,775 in 2023 as the financial damage caused by the pandemic finally peaked.
Quite apart from the cost to the commercial world of the Budget measures in 2024 and 2025 and the gross disruption during the pandemic, other adverse factors have been chewing away at the fabric of the UK business community. Input cost inflation is still too high, debt burdens taken on in the pandemic years still need servicing, and the cost-of-living crisis and restricted disposable incomes continue to sap consumer confidence.
So why hasn’t there been a significant surge in business failures? We asked Nick Hood, Senior Adviser at Opus Business Advisory Group what might be going on to prevent insolvencies rising.
The absence of a recession
“Covid apart, post-war insolvency surges and peaks have been linked to recessions, happening around twelve to eighteen months after the end of each recession. The 1993 insolvency peak followed the busting of the Lawson Boom in 1991. The next peak in 2009 followed the global financial crisis of 2008. The pandemic was longer delayed because of the huge financial support provided by the government, but nevertheless the 2023 all-time high followed the recession of 2020.
We may have had deeply disappointing GDP growth in 2024 and 2025, but it didn’t amount to a recession.”
Business under investment has reduced risk taking
“Insolvency practitioners know that the second most common feature of business failures is ill-conceived, badly controlled or underfunded growth. Sadly, the top cause is bad or incompetent management.
Research published in 2024 by the Institute for Public Policy Research shows that private sector business investment was lower in the UK in 2022 than any other G7 country for the third successive year. The analysis also revealed that the UK ranked a pitiful 28th for business investment out of 31 OECD countries.
The most recent trend has been mixed according to ONS data. The first three quarters of 2025 saw increased investment in Q1 and Q3, but a fall in Q2. In 2024, the first three quarters were positive but Q4 saw investment fall back. But none of these quarters saw a material rise, the largest being 3.9% in Q1 2025.
Rather than invest in their futures, companies have been too busy reducing their debt burdens. Our research shows that all major sectors have been paying down significant amounts of debt over the past two to three years, especially SMEs repaying their Bounce Back Loans. This in itself de-risks balance sheets, making companies look stronger and be less vulnerable to failure.”
Covid taught management flexibility and resilience
“Whatever else the pandemic may have done, businesses learnt fast how to adapt to violent changes in circumstances and as it extended seemingly endlessly, they discovered deeper wells of determination than most realised they had as they battled through repeated challenges. They also learnt the vital importance of monitoring their finances more closely.
In contrast to the shrieks of Armageddon after the 2024 Budget from probably the worst hit of all sectors, insolvencies among hospitality operators have actually fallen in 2025 as a percentage of otherwise static overall failures, a tribute to the survival skills developed in the pandemic.”
Where next for insolvency levels?
“This is anybody’s guess. The second tranche of cost increases, this time from the 2025 Budget, will hit businesses in April 2026. Employment Rights legislation will start to have an impact at various stages during 2026 and then in 2027. The brief threat of tariffs from the USA as punishment for obstructing the acquisition of Greenland showed exactly how unstable the geopolitical landscape can be. Growth-enhancing public sector investment is being restricted as resources are being diverted into the Defence budget.
How battle fatigued are the UK’s entrepreneurs and how many will throw in the towel this year? Only time will tell, but it seems unlikely that insolvencies will fall back to any significant extent.”