Throughout Q1 this year, the UK insolvency landscape has faced historically high rates across a range of sectors, with Q4 2025 seeing an increase from the previous year and Q1 of 2026 on average seeing a 7% increase in insolvencies. Sectoral and regional stresses continue to shape the outcomes for businesses, with the construction, retail and hospitality sectors still under the most strain, and director-led closures are currently dominating the landscape.
In this report, our Business Recovery and Restructuring team discuss the statistics and trends seen in Q1 2026 and predict what the rest of the year will bring for struggling businesses.
Market overview
Across Q1 in 2026, the composition of insolvency types remains consistent with patterns seen throughout 2024 and 2025.
Creditors’ Voluntary Liquidations (CVLs) continue to dominate the landscape, reflecting that directors continue to take proactive steps to wind down financially distressed businesses. Compulsory liquidations rose 4% month-on-month during this first quarter, indicating continued creditor pressure, particularly from HMRC, as tolerance for arrears tightens.
Administrations saw a marked increase of 41% compared with December 2025, highlighting that more companies are seeking rescue or structured turnarounds at an early point when experiencing business distress instead of making immediate closure decisions.
Small-medium sized businesses (SMEs) remain the most vulnerable, with sector pressures in retail, hospitality, construction and business services facing the most challenges, and the affected sectors broadening.
January 2026 – increased administrations, fewer insolvencies compared to 2025
At the start of the year, company insolvencies showed a small month-on-month increase in England and Wales, with 1,744 registered company insolvencies in total. This was a 4% increase from December 2025 but considerably lower than the 2,028 insolvencies saw in January 2025.
Overall distress remained elevated by historical standards, but the January rise appears to be driven mainly by an increase in administrations, which were 41% higher than in December 2025 and 14% higher compared to January 2025.
Despite this, CVLs still dominated the insolvency landscape and made up a total of 76% of insolvencies in January 2026. The breakdown of all insolvencies throughout this month was:
- 256 Compulsory Liquidations
- 1,323 Creditors’ Voluntary Liquidations
- 151 Administrations
- 13 Company Voluntary Arrangements
- 1 Receivership appointment
February 2026 – CVLs and director-led closures
February saw a spike in companies entering insolvencies: 1,878 companies in total entered an insolvency process, which is 7% higher than January 2026 yet 7% lower than February the previous year.
1,473 companies entered the CVL process, 11% up from January 2026, accounting for 78% of all insolvencies during the month.
Administrations dipped slightly from January 2026 but were still 30% higher than in February the previous year. Compulsory liquidations fell 2% month on month but still remain high, which highlights the financial pressures business owners are facing.
These statistics are the result of various pressures that are building across all sectors, including reduced margins, rising National Minimum Wage costs, slower payments from customers and more creditor pressure including HMRC, landlords and other trade creditors.
The insolvency figures for February 2026 were:
- 249 Compulsory Liquidations
- 1,473 Creditors’ Voluntary Liquidations
- 146 Administrations
- 10 Company Voluntary Arrangements
The insolvency statistics across February 2026 show that business distress remains deeply imbedded across the market, especially among SMEs. With monthly increases in total insolvencies and persistent financial pressures impacting the manufacturing, construction and hospitality sectors directors are being forced to make difficult decisions.
March 2026 – rising wages and fuel prices taking its toll
March 2026 saw construction SMEs warned that they will face mounting cost pressures and insolvencies despite the continuous growth in the sector. An increase in wages – linked to National Insurance increases and persistent material price inflation – and ongoing shortages are delaying projects and limiting the growth of many companies.
While there had been early signs of businesses improving and a rise in consumer confidence, the economic fallout from the Middle East conflict is now reversing that momentum. The rising fuel and energy prices are beginning to place additional pressure on operating costs at a time when customers are becoming even more cautious with their spending.
Insolvency figures for March:
- 299 Compulsory Liquidations
- 1,468 Creditors Voluntary Liquidations
- 235 Administrations
- 20 Company Voluntary Liquidations
Sector insights
Construction
The UK construction sector continues to face significant insolvency pressures, remaining the industry with the highest number of company failures in recent years. In 2025, construction recorded 3,931 insolvencies, which represented 17% of all cases throughout the year, a trend that has persisted into early 2026 as rising material costs, labour shortages and heightened creditor action continue to tighten margins.
Looking forward to Q2, construction remains one of the most vulnerable sectors due to ongoing cash-flow fragility and the sector’s exposure to delayed payments and project-funding constraints.
Retail and hospitality
High operating costs, stagnant consumer spending and tightening creditor pressures are all contributing to high instability in the retail and hospitality sector. Throughout 2025, wholesale and retail trade recorded 3,728 insolvencies in total, while accommodation and food services saw 3,353 cases, which all together accounted for almost 30% of all corporate insolvencies. These high levels of insolvencies have continued into 2026 as the sector feels the persistent impact of rising rates, energy and labour costs, after a weaker Christmas trading period. With shifted consumer behaviour, increasingly cautious lending conditions and cost inflation, retail and hospitality remain two of the most pressured industries in the UK.
Overall landscape
The insolvency landscape is changing, with the affected sectors starting to broaden in response to geopolitical activity. The agriculture sector has been impacted by the fall out of the US-Iran conflict, with essential shipments of fertiliser disrupted and food prices inflated due to demand. The real estate industry has also experienced a 58% surge in insolvencies in comparison to Q1 2025, which can be attributed to a refinancing shock combined with higher interest rates and falling asset values, especially in commercial property.
Looking ahead to Q2 – thoughts from our Business Recovery and Restructuring experts
Small business confidence is slowly rising from historic lows without government intervention, meaning fresh cost pressures could drag confidence back down. With tax changes announced in the 2025 Autumn Budget now in effect, small-medium sized businesses (SMEs) and owner-managed businesses (OMBs) face higher energy bills and increases in National Minimum Wage and National Insurance contributions.
The construction sector remains one of the UK’s most distressed sectors with significant borrower development issues, contract disputes and rising administrator appointments. Both the manufacturing and automotive supply chains are also under pressure as they face overseas competition and supply-chain disruptions, stressing margins further. Retail and hospitality sectors continue to struggle due to rising business rates, wage increases and weakened consumer spending, with one in five hospitality businesses concerned of collapse in the next 12 months.
Businesses will also continue to see more aggressive enforcement from creditors, especially HMRC, landlords and other trade creditors due to the increase in late payments seen from business owners. Traditional lenders remain more cautious but are reducing leniency overall. We predict a rise in compulsory liquidations and accelerated formal insolvency filings as a result.
Throughout Q2, we expect company directors to continue to seek professional support in the early stages of financial struggle and, in turn, see a rise in administrations and CVLs. Economic conditions, particularly inflationary pressure, labour costs and creditor behaviour, will continue to shape outcomes, but a shift towards proactive restructuring offers some stability.
Insolvency activity is likely to remain elevated, and early planning and strong financial controls will prove critical for businesses navigating the months ahead.
If you or your business are feeling pressure from these current trends, reaching out for advice at the earliest opportunity can make all the difference. Our specialist team can provide tailored, practical guidance and support with any issue your business is facing.
Get in touch with our team today to discuss your options and plan ahead to through the rest of the year.
