UK businesses remained under intense financial pressure throughout 2025, with more than 28,000 insolvency-related activities recorded over the year, underlining the fragile state of the operating environment despite easing inflation.
New figures from R3, the trade association for restructuring and insolvency professionals, show there were 28,616 corporate insolvency activities in 2025. While this was slightly lower than the 29,366 cases recorded in 2024, the total remains well above pre-pandemic levels.
R3 said the data points to a prolonged period of stress for UK companies, particularly smaller and mid-sized firms with limited financial buffers.
Tom Russell, president of R3, said: “2025 was a year in which UK businesses struggled to regain their footing after several years of economic challenges. While inflation has eased, the cumulative impact of higher costs, tighter credit conditions and weak demand continues to place significant pressure on cashflow.”
The findings form part of R3’s Annual Business Health report, which analyses insolvency trends, start-up activity and sector performance across the UK using data from Creditsafe.
Construction once again accounted for the highest number of insolvency activities, with 4,584 cases recorded in 2025. Although this represented a 6 per cent fall on the previous year, R3 said the sector remains highly exposed to rising material costs, payment delays, skills shortages and subdued investor confidence.
Wholesale and retail followed closely with 4,124 insolvencies, while accommodation and food services recorded 3,831 cases. R3 said these sectors continue to face intense margin pressure as households rein in discretionary spending and businesses struggle to ab sorb or pass on higher operating costs.
Manufacturing insolvencies also remained historically high, with 2,188 cases during the year. Energy prices, supply chain disruption and weaker export demand have all weighed heavily on manufacturers.
One of the sharpest increases was seen in water supply, waste management and remediation, where insolvency activity rose by 14 per cent to 172 cases in 2025, reflecting the growing impact of regulatory pressure and rising operating costs.
Greater London recorded the highest number of insolvencies, with 5,684 cases, reflecting the concentration of businesses in the capital. Encouragingly, this represented an 11 per cent decrease on the previous year.
High insolvency levels were also reported in the North West (4,880 cases), East Anglia (3,812 cases) and the West Midlands (3,152 cases), regions with significant exposure to manufacturing, construction and retail.
The report also highlights a slowdown in new business formation, suggesting a more cautious entrepreneurial climate. Start-ups in Greater London fell by 3 per cent year on year to 259,092, while Yorkshire and Humberside, Northern Ireland and the East Midlands recorded the steepest declines.
However, Wales and Scotland bucked the trend with modest growth in start-up activity, alongside resilience in parts of England including the North West and North East.
Russell, who is also a licensed insolvency practitioner and director at James Cowper Kreston, said the outlook for 2026 remains challenging.
“As we move into 2026, it’s evident that many businesses are operating with limited financial resilience amid tough market conditions,” he said. “Seeking professional advice at an early stage can make a critical difference, giving viable businesses the best chance of survival and recovery.”
R3 warned that without an improvement in demand and access to finance, insolvency levels are likely to remain elevated, even if headline economic indicators continue to stabilise.
