Business insolvencies fall by 2%

Latest figures from the Insolvency Service have shown that the number of registered business insolvencies in England and Wales decreased by 2.9% in March 2025 to a total of 1,992 when compared to February 2025’s total.

Business insolvencies increased by 9.1% when compared to March 2024’s figure of 1,826  than the same month in the previous year.

The business insolvencies consisted of 295 compulsory liquidations, 1,543 creditors’ voluntary liquidations (CVLs), 137 administrations and 17 company voluntary arrangements (CVAs). There were no receivership appointments.

The number of compulsory liquidations was 24% lower than the 10-year high seen in February 2025, but remained higher than both March 2024 and the 2024 monthly average. The number of CVLs in March 2025 was similar to both February 2025 and the 2024 monthly average. Administrations and CVAs were higher than in February 2025.

CVLs accounted for 77% of all company insolvencies. The number of CVLs increased by 1% from February 2025 and was 8% higher compared to the same month last year (March 2024).

Tim Cooper, President of R3, the UK’s insolvency and restructuring trade body, and a Partner at Addleshaw Goddard LLP, said “The slight month-on-month reduction in corporate insolvency numbers is due to a fall in Compulsory Liquidations compared to last month’s figures. However, the corporate insolvency statistics published today are higher than they were a year ago and show that demand for insolvency support and the number of firms entering insolvency processes are still high.

“Creditors’ Voluntary Liquidation, Administration and Company Voluntary Arrangement numbers are higher than they were last month and last March, and reflect a business climate that is being shaped and buffeted by national and global political issues, which are adding further pressure on firms. Creditors also remain prepared to turn to winding-up orders to pursue monies owed, whether that is to recover money for the public purse in HMRC’s case, or to help address their own debts in the case of those creditors from the private sector.

“The announcement of the US tariffs and the rises in National Minimum Wage and Employers NI have caused directors most concern over the last few weeks. These have added further strain on businesses that have been dealing with increases in costs, and contractions and caution around spending for more than 18 months, all of which have hit margins, confidence, and in many cases, firms’ ability to stay solvent. For many small businesses particularly, an increase in late payments has a further knock on impact on liquidity and profitability, in already tight trading conditions for the small business community.

“While it is too early to understand the extent of the impact the tariffs will have on businesses, we know they will affect purchase and sale prices, and will subsequently affect margins and profits, and potentially firms’ ability to service debt and source rescue funding.

“At the same time, March was the last month before the National Insurance and Minimum Wage increases came in, and we know this has affected business confidence, recruitment and investment, as well as driving increases in enquiries for restructuring advice and support. We will see the impact of this policy on businesses from this month, and from the next set of figures, but if firms have not made the most of the time between its announcement and introduction, we could see an increase in corporate insolvency numbers over the next quarter.

“From a sectoral perspective, construction output has been affected by mixed weather since the start of the year and ongoing issues with payment and costs, while retail has seen a slowdown in spending as a result of this year’s late Easter. Hospitality spending has increased in recent months in part due to the warmer weather and as consumers seem more willing to spend money on going out than they had been previously.

“Restructuring Plans remain a key topic of discussion in the profession, with HMRC’s recent support in the Enzen and OutsideClinic cases sparking hope that this might further improve take-up of this process among mid-market firms. Questions still remain around how Restructuring Plans can be made accessible to SMEs, with cost being the biggest issue to resolve, and this is something the profession will continue to explore over this year as we work to find a solution.”

Stephen Goderski, Partner at restructuring and insolvency firm PKF Littlejohn Advisory said “According to the latest government statistics for Q1 2025, the number of registered company insolvencies across the UK has reached 1,992, reflecting a fall of 2% compared to February 2025.  Throughout the first quarter, the UK economy continued to face a series of domestic challenges, exacerbated by broader global instability and the actions of a hugely unpredictable US administration. 

“Inflation remains a significant issue, exerting pressure on purchasing power and complicating the financial environment for both consumers and businesses alike. The Consumer Prices Index (including owner-occupiers’ housing costs) rose by 3.4% in the 12 months to March 2025, down from 3.7% in February. This slight easing is welcome, but the overall economic landscape remains precarious. Businesses continue to face enormous pressures, and the mood music from the US is obliging many companies that  rely on international trade to re-assess their future credit and operational strategies. 

“Despite living ‘in interesting times’, and perhaps counter-intuitively, insolvencies have fallen. The fall, however, does not especially suggest a trend, and many companies are still under pressure, although there will always be businesses which can turn uncertainty to their advantage. For the rest -as well as managing inflation, increased employers’ National Insurance Contributions, higher minimum rates of pay and rising borrowing costs – cash management is key and that means customers paying regularly and on time.  Boards have to ensure that every aspect of the business is functioning at near optimum level.  For example, poor credit control leads to cash flow issues and slippage in the payment of suppliers, which can lead to supply issues.   This can quickly become a slippery slope. 

“Uncertainty is the biggest ongoing threat, especially to those businesses seeking investment. Boards need to be agile and maintain options.  It remains to be seen whether the government’s economic strategy will provide stability and economic growth, or whether further economic shocks will spiral into a recession. 

“So while a fall in insolvencies is always welcome, it may be a false dawn.  For those businesses starting to experience cashflow issues, it is imperative that boards demonstrate their oversight by seeking early professional help.  There may well be opportunities which will need to be explored but a responsible board will also prepare for the worst with robust contingency planning. ”

Simon Edel, UK Turnaround and Restructuring Strategy Partner at EY-Parthenon, said “Despite a slight fall in insolvency activity in March, there has been another uptick in Creditors’ Voluntary Liquidations (CVLs). There has also been a 17% increase in administration activity compared to February, which is 30% higher than March 2024.

“For many businesses, ongoing pressures such as the impact of higher costs, falling business confidence and slow growth came to a head last month as the tax year and, for many businesses, the financial year came to an end.

“On top of these pre-existing challenges, companies are now also dealing with increased employer National Insurance Contributions and the National Living Wage, as well as the potential impact of US trade tariffs. Higher interest rates, increased working capital demands and a difficult credit environment are intensifying liquidity issues for more UK businesses, causing some to choose to call time on their companies rather than looking at rescue options.

“Whilst the volume of company insolvencies continues to be driven by SMEs and CVLs, we are now starting to see stress spread to some mid-market and larger companies, many of which are facing refinancing hurdles.

“Looking ahead, it’s critical that companies focus on opportunities to improve their liquidity to reduce debt requirements, as well as being able to demonstrate a robust trading performance and reliable forecasts to avoid facing challenges when refinancing.

“Since the introduction of the Corporate Insolvency and Governance Act (CIGA) in 2020, 36 restructuring plans have been sanctioned to date. We know that approximately six plans have either not been sanctioned or discontinued. However, it’s worth noting that there is a relatively low number of larger insolvency filings, with a focus on more operational restructuring and consensual solutions.”

John Cullen, Business Recovery Partner at Menzies said “Despite company insolvencies falling in March, they remain much higher than last year, with the construction sector taking the brunt of the pain. If recession is next in a line of challenges for British Business, alongside a heavier tax burden and a decline in investor and lending confidence, we may be hurtling towards a new wave of business insolvencies.

“While the impact of Trump’s tariffs on the UK are yet to be felt, supply costs continue to rise, and with the US being the UK’s biggest trade partner, considerable concern is raised for British construction, manufacturing, logistics, retail and trade as they attempt to adapt to an ever-changing geo-political environment.

“As ever, our message would be for businesses to act early if they anticipate financial trouble. Doing so ensures that more options are available for you to secure a profitable future and remain trading.”

Vernon Dennis, Partner and Head of Business Advisory at Howard Kennedy said”We mustn’t be fooled by the unexpected tone of positivity in today’s statistics; the reality is quite the opposite. With the plethora of changes that have only just really set in, including tariff rises, end of business reliefs and minimum wage increases, the worst is undoubtedly yet to come – the true picture to be illustrated in future results. 

“What is particularly interesting is the chasm in the rates of liquidations in comparison to restructures. Whilst both have risen, one would generally expect these to be in lockstep. The fact that this has not been the case in this instance points to a wider shift in the restructuring and insolvency space. 

“It will be interesting to see whether this gap continues to open up, due to businesses simply not having the resources to restructure in time to survive and instead succumbing to insolvency.”