Business failures fall but confidence remains subdued

The number of UK businesses entering insolvency-related processes fell in the second quarter of 2026, but a decline in new company registrations suggests business confidence remains subdued, according to R3 analysis.

R3’s latest Quarterly Business Health report, based on data from Creditsafe found there were 6,854 insolvency-related activities in Q2 2026, down 6% compared to the same period last year and 5% lower than the previous quarter. At the same time, 184,873 new UK companies were registered during the quarter, a 6% decrease on Q2 2025 and 2% lower than Q1 2026.

The findings point to a business landscape where fewer firms are entering formal distress processes, but where entrepreneurs remain cautious about launching new ventures.

R3 President and Partner at Knights, Sonia Jordan said “R3’s latest Business Health report shows a mixed picture of the UK economy. The decline in new companies being formed suggests that many would-be entrepreneurs are taking a wait-and-see approach.

“While insolvency-related activity has fallen, businesses continue to face a range of pressures, from higher employment costs and ongoing geopolitical uncertainty to concerns around consumer demand and cashflow. These factors can all make launching a new business feel like a greater risk than it might have done previously.

“Although fewer failures are welcome, sustainable economic growth requires both resilient businesses and a healthy pipeline of new enterprises entering the market.”

Construction remained the sector with the highest level of insolvency-related activity in Q2, with 1,177 cases, followed by accommodation and food services (935) and wholesale and retail (885). Although all three sectors recorded year-on-year reductions in insolvency activity, they continue to account for a significant proportion of cases.

The report also highlights growing pressures in some parts of the economy. Insolvency-related activity among financial and insurance businesses increased by 19% year-on-year to 194 cases, while the real estate sector saw cases rise by 16% in the first half of 2026 compared with the same period in 2025.

Regionally, Greater London recorded the highest number of new businesses, with 62,853 start-ups, followed by East Anglia (21,353) and the North West (18,875). However, every UK region saw a year-on-year decline in start-up activity, with the sharpest falls recorded in Northern Ireland (-15.7%), Wales (-15.1%) and the North East (-9.0%).

Greater London also recorded the highest level of insolvency-related activity, with 1,461 cases, followed by the North West (1,044) and East Anglia (914). Most regions experienced year-on-year declines in insolvency activity, led by Wales (-22.0%), the North West (-17.5%) and Northern Ireland (-14.3%).