Business insolvencies increase by 2.9%

Latest figures from the Insolvency Service have shown that the number of registered business insolvencies in England and Wales increased by 2.9% in February 2025 to a total of 2,035 compared to January 2025’s total of 1,978, and decreased by 7% compared to February 2024’s figure of 2,188.

The business insolvencies consisted of 393 compulsory liquidations, 1,520 creditors’ voluntary liquidations (CVLs), 115 administrations and 7 company voluntary arrangements (CVAs). There were no receivership appointments.

The number of compulsory liquidations was 41% higher than in January 2025 and 49% higher than in February 2024. 

CVLs accounted for 75% of all company insolvencies. The number of CVLs decreased by 2% from January 2025 and was 13% lower compared to the same month last year (February 2024) after seasonal adjustment.

The number of administrations in February 2025 was 18% lower than in January 2025 and 27% lower than in February 2024

The number of CVAs was 42% lower in February 2025 than February 2024 and 50% lower than in January 2025.There were no receivership appointments.

Tom Russell, Vice President of R3, the UK’s insolvency and restructuring trade body, said “The monthly increase in corporate insolvencies is driven by a rise in Compulsory Liquidations, which are at their highest level in more than five years, while the year-on-year reduction is due to a fall in Creditors’ Voluntary Liquidations (CVLs) and Administrations. Compulsory liquidations are often initiated by HM Revenue and Customs or local authorities as a measure of last resort and the increase indicates a toughening of the position towards debts owed by companies to the public sector and the ongoing efforts of government to help balance their books.

“A number of economic and political issues are continuing to drive insolvencies and affect businesses across the supply chain. High costs and cautious consumer and client spending mean creditors are being more aggressive about pursuing the money they are owed and aren’t afraid to turn to the courts to recover outstanding debts, while a large proportion of directors of insolvent businesses feel closure is the only option open to them after years of trading through tough conditions and with little hope of these improving in the short-term.

“With firms facing further increases in expenses when the increases to National Insurance and National Minimum Wage are introduced in April, enquiries for restructuring and insolvency support are increasing as directors look to take specialist advice about their business finances, and we expect this to continue for the next few months as the impact of the rise in outgoings becomes apparent. This is a particular issue for small businesses as they can find it difficult to pass on extra costs to customers whilst remaining competitive, and many businesses of this size will inevitably be considering making savings through, for example, reduced investment or reductions in staff levels.

“From a sectoral perspective, retail and hospitality firms are continuing to suffer as consumers continue to cut back their discretionary spending, while construction output has been affected by a fall in new work and poor weather, and manufacturing has continued to be affected by cost and trade issues, which have hit demand and output levels. All of these sectors have had to contend with continuing increases in costs alongside these challenges, and are likely to be among those most affected by the NI changes that are being introduced in April.”

Giuseppe Parla, Business Recovery Director at Menzies said “January delivered a fatal blow to a wave of British businesses, and February has followed suit with a further increase in company insolvencies. With changes to tax rates coming next month, businesses face lower returns on sales and less disposable funds, and we may well be heading towards yet more collapses. And with the recent fall in economic growth, all eyes are now on the Bank of England’s base rate review and the Spring Forecast, in a bid to provide businesses with much needed stability, and to finally see green shoots of recovery.

The construction industry experienced the highest number of insolvencies in the 12 months to January 2025 at 4,031, making up 17% of all industry cases.

Commenting on the latest construction insolvency statistics Kelly Boorman, National Head of Construction at RSM UK, said “Construction continues to experience the highest number of insolvencies above any other sector, which is to be expected given the ongoing burden of expensive debt and fragile supply chain. We are seeing a strong pipeline of work, however we’re not seeing the volume of delivery increase due to delays in mobilisation and the financial constraints, along with uncertainty in the aftermath of the Autumn Budget.

“Businesses are therefore preserving working capital and are yet to see the growth they anticipated in 2025. One of the main financial challenges for construction is the incoming increase to employers’ NIC. The industry is already under-resourced, and the increase to labour costs will squeeze margins.

“However, the UK is recognised by overseas investors as a good place to do business, especially in the real estate market. As a result, the construction industry has reason to be cautiously optimistic, buoyed by private and infrastructure investment. But, progress is limited by high borrowing costs, political uncertainty, and regulatory challenges. This has a knock-on impact on the supply chain, which remains fragile due to lack of mobilisation and availability of reasonably priced debt. The sector is likely to see more casualties before it improves, and we expect delivery of projects to accelerate towards the back end of 2025, 12 months later than forecast.

“But, last week marked a significant step as the government announced updates to its Planning and Infrastructure Bill. These changes will remove red tape, streamline planning, and accelerate decision-making, reducing administrative delays. They will also empower local authorities to have more control over infrastructure projects, ensuring better allocation of resource to meet local demand. While this is a promising development, it will take some time to materialise and it’s important the government considers the role of technology in accelerating delivery in the run up to the Spring Statement.”