Business insolvencies increased by 7.9% in May

Latest figures from the Insolvency Service have shown that the number of registered business insolvencies in England and Wales increased by 7.9% to 2,238 in May 2025. when compared to April 2025 (2,074) and 15% higher than the same month in the previous year (1,946 in May 2024).

The insolvencies consisted of 354 compulsory liquidations, 1,734 creditors’ voluntary liquidations (CVLs), 136 administrations and 14 company voluntary arrangements (CVAs). There were no receivership appointments.

In May 2025, CVLs accounted for 77% of all company insolvencies. The number of CVLs increased by 11% from April 2025 and was 13% higher compared to the same month last year (May 2024).

The number of compulsory liquidations in May 2025 was 7% lower than the 10-year high seen in April 2025, but 32% higher than in May 2024 and 31% higher than the 2024 monthly average.

The number of administrations in May 2025 was 28% higher than in April 2025 and 12% higher than in May 2024.

The number of CVAs in May 2025 was 42% lower than in April 2025 and 26% lower than in May 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 insolvency and restructuring trade body, and a Licensed Insolvency Practitioner and Director at James Cowper Kreston, said “The monthly increase in corporate insolvencies is due to an increase in Creditors’ Voluntary Liquidations and Administrations, and the yearly increase due to a rise in the number of companies entering these processes and an increase in Compulsory Liquidations. The climate remains very tough for businesses and we are seeing this reflected in the number of directors who are actively taking steps to wind-up their companies, and the number of creditors who are turning to the courts to pursue the debts they are owed – led by HMRC who are attempting to recover money for the public purse.

“Ongoing economic and geopolitical issues are being reflected in insolvency numbers. We expected April would be difficult for firms following the introduction of the new National Insurance and National Minimum Wage rates and the issues around US tariffs, and the economic contraction that took place reflects the impact these and other issues had on businesses and the economy.

“Challenges like these do not go away overnight, and May was another tough month for businesses in England and Wales as a result of these issues and the ongoing costs of materials, staff and energy, as inflation remains above the Bank of England target, all of which affected businesses and business planning.

“The uncertainty around the US tariffs continues to create a number of challenges for businesses, and has made medium and long-term planning more difficult as businesses are forced into a more reactive, short-term mindset. While progress has been made around the tariffs and the adjusted rates are good news for a number of industries, the fact remains that costs will increase compared to what they were a year ago, and a number of other details relating to the tariffs have still yet to be agreed.

“Closer to home, businesses are still feeling the pinch of the increases in National Insurance and National Minimum Wage, with many forced to raise prices, reduce staff or cut back on expansion to manage the additional costs these have brought. This is going to potentially create wider economic issues in the long-term as firms are forced to batten down their hatches to survive after years of dealing with increases in costs and cautious consumer and client spending.

“Although the latest figures show construction output grew, the sector still faces issues with margins, costs and payment, while the retail and hospitality sectors have been affected by poor consumer spending over the last month. Retail and hospitality businesses will be hoping for a long, hot summer to encourage people to go out and spend money, and businesses in both sectors have reacted to the rise in wage costs by following the wider trend of freezing recruitment and not replacing people who have moved on to other jobs, and in cutting hours for casual staff where they can.”

Kathleen Garrett, Partner at Reed Smith said “Businesses are facing a raft of challenges which have caused insolvencies to start rising again. The headwinds from additional business costs such as the recent increases to national insurance and a fraught geopolitical environment in terms of tariffs and unrest appear to have had an effect on business. 

“Though there was a fall in last month’s figures compared to the previous 12 months, these latest figures for May 2025 reveal insolvencies are now higher month on month (8%) and higher than this time last year (15%), showing that these latest developments have sent some businesses over the edge. UK consumer confidence remains low: though there was a slight uptick in May, we’ll need to see this continued over the summer if the business environment is to stabilise.

“Interest rates will play a key role in where things go from here. There is a lot of stress in the system and the cost of credit is a significant contributing factor. The Bank of England’s decision yesterday to hold rates was expected but is a sign that though rates are coming down, it is a much more gradual descent than many would have hoped. This is mirrored by the Fed in the US in holding rates despite forecasts suggesting slower growth, higher inflation and unemployment. Further, it remains to be seen if recent international trade and tariff deals will yield business benefits and halt a shrinking economy.

“It’s also important to remember that the figures alone don’t offer a complete picture. They can be easily skewed by a higher or lower number of CVL’s which make up a large percentage of the overall numbers. That said, with CVLs higher than both April 2025 and the 2024 monthly average and winding up petitions 7% lower than the 10-year high seen in April 2025, but higher than both May 2024 and the 2024 monthly average, this suggests less patient creditors are taking action and business is struggling to trade through the challenges.

“With the lack of liquidity in the market now being felt, a shrinking economy, global instability, elevated energy prices and currency volatility coupled with the risk of tax increases in the UK later in the year, it looks like we may see another period of elevated insolvencies.”

Giuseppe Parla, Restructuring and Insolvency Director at Menzies said “Corporate insolvencies are on the rise, as challenging economic conditions continue to bite British businesses. Following the spending review by the Chancellor, it appears that, despite the unexpected 0.3% contraction of the economy, there is no let up on the potential of taxes being increased further. This, coupled with inflation being higher than the Bank of England’s target of 2%, puts businesses under further pressure – and today’s statistics support this.

“Sectors that continue to struggle are construction, wholesale & retail trade and hospitality. Whilst interest rates may come down further later in the year, stability for our economy seems to be what is required, but how easy will that be to achieve?

“On a more positive note, recent months have seen an increase on the Administration process being used rather than liquidations. An Administration is a recovery procedure that is often used for larger entities and should produce a better outcome for creditors. Obtaining advice early allows for the option of an administration process, if the overall objective can be achieved.”