Insolvency statistics released during 2025 show that company failures are running at near-record highs, with small to medium-sized enterprises (SMEs) struggling to stay afloat in particular.
While the rate of failures is influenced by the record number of active businesses on Companies House register, the volume of insolvencies signals a worrying climate.
An overview
On a rolling annual basis, there are 53 insolvencies per 10,000 companies, which is historically high, despite being down from 56 in 2024.
These rates reflect not just the number of closures, but also that the total pool of registered companies is larger than in the past, making direct comparisons with earlier decades more complex.
Insolvency rates for the first half of 2025 tracked at similar levels to 2024, which would translate to more than 24,000 businesses failing this year, if current rates are maintained.
The statistics
Around 75% of insolvencies in the first half of 2025 were Creditors’ Voluntary Liquidations (CVLs), showing that directors are increasingly opting to close companies voluntarily rather than waiting for creditors to force Liquidation upon them.
These figures, despite linking to the cost-of-living crisis that followed the Covid-19 pandemic, are reflected across most of the Western world, with almost every country struggling to achieve economic growth.
Struggling sectors and industries
The main industries that struggled the most, during the first half of 2025, were construction, retail, hospitality and manufacturing for a variety of reasons.
The construction sector faces an increase in late payments from clients and rises in material costs that stretch company budgets. The manufacturing industry is experiencing pressure to increase prices, due to instability from the changing US tariff prices, as well as difficulty recruiting skilled workers. Retail and hospitality remains the main sector affected directly by the cost-of-living crisis, with declining footfalls and tighter household budgets, having a knock-on effect to business costs.
SMEs face a higher rate of insolvencies, in comparison to larger businesses, as most lack the cash reserves or finance options that bigger companies can fall back on. Business closures are most evident in city centres and high street locations, where trading conditions remain difficult.
The UK government published a plan earlier this year to support SMEs, which you can read in full here.
The underlying causes of business insolvency in the UK
Business owners face financial pressure from a variety of areas, most of which are out of their direct control.
The cost-of-living crisis remains burdensome, with persistent inflation causing energy bills and delivery costs to remain high, and the increase in minimum wage and National Insurance Contributions (NIC) reduce businesses margins further.
Access to credit is also limited, as banks raise lending thresholds and interest rates have continued to climb. HMRC has increased enforcement activity for unpaid debts, pushing some companies into compulsory Liquidation as a result.
Consumer behaviour continues to shift towards online spending and essentials-only purchasing, which leaves discretionary sectors such as hospitality and luxury goods exposed.
What can businesses learn from these statistics?
The causes of insolvency are widely known and affect a vast number of businesses across the country. However, there are steps businesses can take to limit the impact of external financial pressures.
Understanding and managing the cash flow of a business is incredibly important, as is forecasting income and expenditure enabling them to plan ahead. Building in financial buffers and diversifying revenue streams are also critical for resilience to an ever-changing financial climate.
If your business is showing signs of struggling, it is important to seek advice as early as possible. It is risky to wait until creditors actions escalate, as this can increase the risk of personal liability, particularly if wrongful trading or director misconduct/misfeasance. Get in touch with a member of our team today if you have concerns about the future of your business.
