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Insolvency numbers stable year on year, as business landscape evolves
The Government, through its Insolvency Service, has released the latest report on companies entering insolvency procedures for 2025.
While overall UK insolvency numbers in 2025 remain broadly in line with 2024, increasing only from 23,872 in 2024 to 23,938, the composition of insolvencies has continued to change, reflecting a more established and typical pattern of business distress.
One of the most noticeable developments during the year has been the further reduction in Covid-related insolvencies. The backlog of companies that survived only as a result of pandemic support schemes has now largely worked through the system. As a result, insolvency figures are less influenced by historic intervention and provide a clearer view of the underlying economic challenges facing businesses.
In their place, 2025 has seen a more typical mix of SME insolvencies across all sectors. While pressure is evident across the economy, retail and hospitality continue to be particularly challenged. Businesses in these sectors are still struggling with an increased employee and property cost base, alongside the continuing transformation of the high street.
Although when structured correctly, Time to Pay arrangements can be successful, there has been an increase in compulsory liquidations during the year, from 3,230 in 2024, to 3,730. This trend is almost certainly a reflection of firmer and more proactive enforcement activity by HMRC.
At the larger end of the market, Restructuring Plans have continued to grow in prominence. Introduced in 2020, the procedure has become an increasingly popular tool for dealing with the challenges faced by large, complex entities. Of the 57 Restructuring Plans registered since their introduction, 22 were registered in 2025 alone, including high‑profile multi‑site national retailers such as Poundland. This trend reflects the growing acceptance of the process as a practical solution for complex financial restructurings.
Looking ahead to 2026 and beyond, SMEs face a number of ongoing and emerging pressures. Alongside increased employment and property costs, businesses must also contend with further structural changes to their operating models, particularly as a result of increased adoption of technology and AI.
AI will soon, if it is not already, become less of a competitive advantage and more of a commercial necessity. As the majority of businesses begin to use AI in some form, the challenge for smaller organisations will be whether they are able to adapt existing business models quickly enough. For many, the risk is no longer falling behind competitors, but whether failing to use AI at all will impact long‑term survival.
Although insolvency volumes may now appear more settled, the operating environment for businesses remains complex and demanding. The ability to adapt, restructure and respond to structural change will remain critical as companies navigate the challenges ahead.
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