UK businesses continued to struggle under financial pressure throughout 2025, with more than 28,000 insolvency-related activities recorded, highlighting the fragile state of the corporate environment despite easing inflation.
New data from R3, the trade association for restructuring and insolvency professionals, shows that 28,616 corporate insolvency activities were logged during the year. While slightly lower than the 29,366 cases in 2024, the total remains well above pre-pandemic levels, reflecting sustained stress on firms across the country.
Tom Russell, president of R3, said: “2025 was a year in which UK businesses struggled to regain their footing after several years of economic challenges. While inflation has eased, the cumulative impact of higher costs, tighter credit conditions and weak demand continues to place significant pressure on cashflow.”
The figures form part of R3’s Annual Business Health report, which analyses insolvency trends, sector performance, and start-up activity using data from Creditsafe.
The construction sector recorded the highest number of insolvencies in 2025, with 4,584 cases, down 6 per cent from 2024. Despite the fall, R3 warned the sector remains vulnerable to rising material costs, payment delays, skills shortages and subdued investor confidence.
Wholesale and retail recorded 4,124 insolvencies, while the accommodation and food services sector logged 3,831 cases. R3 said these industries are under pressure as households cut discretionary spending and businesses struggle to absorb or pass on higher operating costs.
Manufacturing also saw high insolvency levels, with 2,188 cases reported. Rising energy prices, supply chain disruptions and weaker export demand have continued to weigh on the sector. Water supply, waste management and remediation services experienced one of the sharpest rises, with insolvencies climbing 14 per cent to 172 cases, driven by regulatory costs and higher operational expenses.
Regionally, Greater London recorded the highest number of insolvencies at 5,684 cases, though this was an 11 per cent decrease from the previous year. The North West (4,880), East Anglia (3,812), and the West Midlands (3,152) also saw significant numbers, reflecting their heavy exposure to manufacturing, construction and retail businesses.
The report highlighted a slowdown in new business formation, signalling a cautious entrepreneurial climate. Start-ups in Greater London fell 3 per cent year-on-year to 259,092, while Yorkshire and Humberside, Northern Ireland, and the East Midlands reported some of the steepest declines. Wales and Scotland recorded modest growth, and parts of northern England showed resilience.
Russell said the outlook for 2026 remains challenging. “Many businesses are operating with limited financial resilience amid tough market conditions,” he said. “Seeking professional advice at an early stage can make a critical difference, giving viable businesses the best chance of survival and recovery.”
R3 cautioned that without improvements in demand and access to finance, insolvency levels are likely to remain elevated, even if headline economic indicators continue to stabilise.
