Business insolvencies fall slightly

Latest figures from the Insolvency Service have shown that the number of registered business insolvencies in England and Wales fell by 1.7% in August 2025 to a total of 2,048 compared to July 2025’s total of 2,083, and increased by 5.9% compared to August 2024’s figure of 1,933.

There were 2,048 in August 2025 the insolvencies consisted of 311 compulsory liquidations, 1,600 creditors’ voluntary liquidations (CVLs), 121 administrations and 16 company voluntary arrangements (CVAs). There were no receivership appointments.

The number of compulsory liquidations was 9% lower than in July 2025 and was also lower than the 2025 monthly average to date, although higher than monthly numbers in 2024.

The number of CVLs in August 2025 was similar to both July 2025 and the 2024 monthly average. Administrations were lower than in July 2025, while CVAs were higher. The number of CVLs increased by 1% from July 2025 and was 5% higher compared to the same month last year (August 2024).

The number of compulsory liquidations in August 2025 was 9% lower than July 2025, but 11% higher than in August 2024 and 15% higher than the 2024 monthly average.

The number of administrations in August 2025 was 17% lower than in July 2025 but 6% higher than in August 2024. However, the average monthly number of administrations so far in 2025 is slightly lower than the 2024 monthly average.

The number of CVAs in August 2025 was 33% higher than in July 2025 and 20% lower than in August 2024. Numbers remain low compared to historical levels. CVAs are not seasonally adjusted due to low volumes.

Tom Russell, President of R3, the UK’s restructuring, turnaround and insolvency trade body, and a Licensed Insolvency Practitioner and Director at James Cowper Kreston, said “Corporate insolvencies have decreased slightly in August 2025 when compared to the previous month, but have increased almost 6% when compared to the same month last year.  The trend shows continued high numbers of formal insolvencies, although some way off the peaks of 2023 when pandemic-era problems unwound.

“For many businesses, uncertainty in what is already a difficult trading environment remains the dominant theme. The now confirmed November Budget is already casting a long shadow, with widespread speculation about possible changes to business taxation, such as the bank surcharge and business rates.  Until the details are known, it is harder for directors and investors to make investment, recruitment and expansion decisions. This hesitancy has wider economic consequences for growth and productivity, as indicated by the latest disappointing GDP figures for July.

“The well-documented problems businesses face because of higher costs caused by inflationary pressures are also beginning to come to the fore once again.  Higher costs for energy and materials are once again eroding margins.  Businesses cannot always pass these increases onto consumers, many of whom are themselves reducing discretionary spending.

“Interest rate expectations are a further constraint. While businesses had hoped for meaningful reductions in the cost of borrowing this year, the expectation now is that rates will remain at their current level for some time, in part because of inflationary concerns. This keeps the cost of servicing debt higher and makes new borrowing for investment harder to justify.

“Sector-specific pressures are also evident. Construction is struggling, with housebuilding slowing and smaller contractors reporting quieter pipelines. This is a sector that tends to feel changes in economic conditions quickly, and many firms lack the reserves to withstand long gaps between projects. Retail and hospitality also continue to face difficulties, with high staff costs, subdued consumer confidence and no major summer events to boost spending.  A further update on transforming business rates is expected in the November Budget but for struggling retail and hospitality businesses meaningful change is needed quickly.

“The labour market is beginning to reflect this uncertainty.  Unemployment continues to edge up while vacancies have fallen, and high-profile industrial disputes contribute to a general sense of unease.

“Employers are often leaving posts unfilled or reducing hours but we are not thankfully seeing large scale redundancy. In some cases, businesses are investing in technology, and utilising AI and automation to ease cost pressures. This shift may increase productivity and help balance the books, but it creates the perception of a cooling jobs market.

Nick O’Reilly,  Restructuring Director at MHA said  “We are seeing a pronounced long-term rise in compulsory liquidations enforced by HMRC for the non-payment of tax. In December 2020, the ‘HMRC as preferential creditor’ policy came into force, protecting the tax unpaid by insolvent companies and, following payment of employees, securing any available assets to pay unpaid tax.

“Following restrictions on the enforcement of this policy as the economy came out of the Covid-19 suppression of insolvency numbers in the subsequent years, we are now beginning to see the impact of the HMRC clamp down — from 2,838 in 2023 and 3,237 in 2024, the 2025 total is set to rise again as there have already been almost 2,400 compulsory liquidations in the first seven months of this year. This renewed vigour could be a ‘cost-free’ way of raising tax revenue — if the Treasury could lead to a boost to Government finances, this could curb the most severe of the Chancellor’s tax rises at the Autumn Budget.

“The increase in compulsory liquidations remains a sign that many businesses are struggling, facing pressures from high business costs, a sluggish domestic economy, international trade tensions, and, most importantly, a tight labour market.

“According to the House of Commons’ most recent economic indicators, businesses in the services sector account for 81% of the UK’s total economic output and 83% of total employment. The biggest expense for these companies is staff — as wages continue to rise considerably faster than inflation, and skills shortages push the best talent to command higher compensation, many businesses that fail will have unsustainable labour costs to blame.”