creditcontrol.co.uk
Paying the bills is getting tough, but so are the creditors
After a sharp rise in company insolvencies in March 2025 coming in significantly higher than February 2025 and compared to a year ago in March 2024), pundits were somewhat surprised to see the insolvency figures for April plateau – there were 2,193 failures against 2,225 the month before.
This was despite the cries of ‘Armageddon’ from the screeching Jeremiahs, which had greeted the Autumn Budget’s announcements of tax increases for employers, a sharp rise in the Minimum Wage and a reduction in business rates discounts for smaller companies, all of which came into effect on 1 April 2025. The predictions of commercial doom were then repeated in the wake of the Trump tariffs announced on Liberation Day on 2 April 2025.
Perplexed at what might be happening to keep levels static amid so much potential negativity, we asked Nick Hood, Senior Adviser at Opus Business Advisory Group for his views as he pounds the insolvency treadmill.
Latest insolvency statistics
“The best way to look at the overall situation with business risk is not to look at individual monthly numbers, but instead to analyse the less volatile rolling 12-month total for insolvencies. Here the trend looks far more oscillating. The figure for the whole UK of April 2025 on a non-seasonally adjusted basis was 25,392. The same time a year ago, the total was 27,165 or 7% higher. But a year further back in April 2023, the total was only 23,942, or 6% lower.”
Falling Administrations
“Look under the bonnet of this jalopy hiccoughing along first accelerating wildly and then braking hard, and some explanations begin to emerge. For sure, business rescue through the Administration route is declining. It has fallen from 10% of insolvencies pre-pandemic to only 6% now, largely because of the restrictive attitude of the Courts to costs incurred by Administrators, as well as the changed business lending market where funders are far less willing to risk pouring money into a potential black hole.”
Escalating creditor enforcement
“But by far the biggest story here is the hardening attitude of creditors and in particular, HMRC. Their ultimate enforcement mechanism is to push debtors into Compulsory Liquidation (CWU) after serving them with a Winding Up Petition (WUP). We now have statistics for both CWUs and WUPs to confirm what anecdotal comments had already suggested was going on.”
Compulsory liquidations
“Looking at the end of the enforcement process, CWUs are now running at 4,047 a year, 12% higher than a year ago and 47% up on April 2023. The latest figure is 16% of all insolvencies, compared to 13% in April 2024 and only 11% in April 2023. In the single month of April 2025, CWUs were 19% of all insolvencies.”
Winding up petitions (WUPs)
“At the beginning of the serious phase of debt collection, WUPs are rising too and even faster. The six months to March 2025 have seen a rapid growth in the number of WUPs filed against debtors in England & Wales. In Q1 2025 alone, there were 2,093 WUPs issued, a rise of 38% over both Q3 and Q4 2024.”
“There are also reports of Q1 2025 having been one of the busiest periods for the Insolvency Courts with more than 3,700 scheduled hearings. This was approximately 25% more than the same quarter in 2024. If the Q1 2025 WUP figures were to be repeated through the rest of the year, it would mean that CWUs would rise to over 8,000 or more than double the current annual run rate.”
HMRC
“Astonishingly, more than half of WUPs are now being issued by HMRC and their dominance of the enforcement scene is increasing. It appears that the inability of some Companies to pay tax bills has been the final nail in the coffin for firms in financial distress. There has been a jump from the 630 WUPs (41%) filed by HMRC in Q3 2024, compared to their 1,069 WUPs (51%) filed in Q1 2025.”
Construction industry
“Construction has been the sector with the highest rate of business failure for decades and currently accounts for 17% of company insolvencies. But now its share of WUPs has soared to 583 (28%) in Q1 2025. Of these, 230 WUPs were issued by HMRC, illustrating vividly the issues with staying on top of tax liabilities for construction businesses.”
What next for financial risk and business failures?
“Just how the twin impacts of the Autumn Budget cost increases and the global trade war turmoil will play out for UK businesses over the next12 to 18 months remains to be seen and the latter cannot be predicted with any degree of certainty.”
“What looks clear is that the long period of creditor patience and indulgence for embattled businesses that built up during the pandemic is over, in particular for tax debts owed to HMRC.”
“Those monitoring credit risk need to focus in particular on their debtors’ payables profile and especially their payment record on tax liabilities. For those managing challenging cash flow issues, using HMRC as an involuntary lender to smooth out blips in their liquidity has become a deeply dangerous strategy.”