Pressure mounts on retail, real estate and education sectors as insolvency levels increase

Insolvency-related activity rose across several key sectors in the third quarter of 2026, highlighting uneven pressure on businesses, according to R3’s latest quarterly Business Health report. This is despite overall levels of distress remaining largely stable.

The report, based on Creditsafe data, found there were 6,939 insolvency-related activities in Q3 2026, including administrations and voluntary and compulsory liquidations, similar to the previous quarter’s total of 6,854 and Q3 2025 (6,912).

However, sectors such as wholesale and retail, professional services, real estate and education saw significant increases in insolvency activity. Wholesale and retail rose from 885 cases in Q2 to 953 in Q3, an 8% increase, making it the second most distressed sector behind construction.

Real estate insolvency activity increased by 7% quarter-on-quarter from 435 to 467 and by 29% compared with the same period last year (363) while professional services rose to 623, up 6% quarter-on-quarter and 4% year-on-year. These sectors have been affected by rising costs and the ripple effects of the collapse of mortgage provider Market Financial Solutions.

Meanwhile, education sector activity increased by 25% on the previous quarter and 15% on Q3 2025, increasing to 99 cases from 79 last quarter.

R3 President and Partner at Knights, Sonia Jordan, said “R3’s latest Business Health report suggests that while overall levels of business distress are stabilising, pressures are becoming more pronounced in certain sectors.

“It has been a particularly difficult quarter for the retail sector demonstrated by well-known retailers like TG Jones and Poundland closing stores after falling into financial difficulty. Consumer spending remains cautious, operating costs are high and many businesses are still adjusting to higher employment costs.

“The prolonged summer heatwave is also likely to have created trading challenges for some high street retailers, with fewer people visiting physical shops. While any impact on insolvency activity may not be seen immediately, it adds to the pressures already facing these businesses.

“We are also seeing signs of pressure in the professional services and real estate sectors, in part due to the ripple effect that the failure of mortgage provider Market Financial Solutions has had on the wider financial and professional services network and supply chains.

“While education has not traditionally been among the sectors most associated with financial distress, the increase in insolvency-related activity suggests some institutions are facing increased demographic and financial pressures.”

The report found that construction remained the sector with the highest level of insolvency-related activity, with 1,133 cases in Q3. Wholesale and retail overtook accommodation and food services to become the second most distressed sector last quarter recording 953 insolvency-related activities compared to 932 in accommodation and food services.

The report revealed there were more than 18 million overdue invoices recorded across UK businesses in Q3, an increase of 8% on the same period last year when there were 16.9 million.

Jordan concluded “Cashflow remains one of the most significant challenges facing businesses. Late payment continues to have a real impact on directors’ ability to invest, grow and meet their financial commitments.

“If directors are concerned about their business’s finances, the earlier they seek professional advice, the more options available. Taking advice early from an expert R3 member can often make the difference between recovery and formal insolvency.”