UK insolvency and restructuring trends: sector pressures rise

Corporate insolvencies in England and Wales have continued at pace through 2025, broadly tracking 2023’s 30-year highs. In August 2025, 2,048 company insolvencies were recorded – a 6% year-on-year increase.

Creditors’ voluntary liquidations (CVLs) continue to dominate, typically accounting for 75-80% of cases with a steady, if slightly uneven, level of administrations.

A recent report estimates that more than 666,000 UK businesses are in significant financial distress, meaning they’re struggling to meet financial obligations. This is up 10.8% on this time last year and 15.2% on Q1 2025.

At HCR Law, our assignments representing the lower mid-market over the last 12 months suggest that no sector is immune. However, construction, retail and wholesale, manufacturing and hospitality continue to be among the most affected.

Construction: still the hardest hit

Construction remains the most affected sector by volume, representing 17% of all insolvencies. Recent data shows that over 100,000 UK construction companies are in “significant” distress. This has led to ongoing subcontractor fragility and a domino effect of insolvencies across the construction chain.

In our experience, realisations from construction insolvencies are typically modest and often involve working closely with the lender and office-holder on a build out to maximise the amount paid to the lender.

Retail and wholesale: squeezed margins

At HCR, we’ve seen an uptick in instructions across the automotive supply chain, reflecting the sector’s consistent ranking among the top three SIC sections in Insolvency Service industry tables.

High wage bills, business rates revaluations and weak discretionary spend are key pressures on the sector, with better-capitalised chains being able to rationalise estates while independents continue to struggle.

Hospitality: hit by seasonal volatility

As expected, the hospitality sector continues to suffer from low profit margins, seasonal fluctuations and high energy costs. We advised several casual dining sector businesses in the run-up to Christmas, which is traditionally the busiest period. One example was Project Igloo, a restaurant chain with 18 sites, which saw is entire profit wiped out by increases to the living wage and NIC, resulting in a pre-pack that saved 400 jobs but led to the closure of eight sites.

Manufacturing: rising distress

Manufacturing remains a mid-table contributor by number of cases, but with rising levels of “critical distress” readings year-on-year. The sector continues to be impacted by high energy costs and deferred capital expenditure.

Procedure trends: what does the last 12 months tell us?

• CVLs remain the workhorse, accounting for nearly four in five corporate insolvencies in England and Wales by mid-2025
• Compulsory liquidations are higher than 2024 monthly averages, reflecting increased creditor enforcement via winding-up petitions
• Administrations have trended modestly lower through mid-2025 compared to 2024 averages, but remain essential for going-concern rescues – especially in construction, retail and manufacturing
• CVAs are still rare by volume, even after a slight uptick from 2022’s series low, and are most useful for multi-site lease portfolios where operational viability is otherwise sound
• Part 26A restructuring plans are now maturing as a mid-market tool, but volumes remain small nationally since their 2020 debut. These are best suited to larger, complex capital structures with cross-class issues.

Outlook

• Although there have been recent rate cuts, many firms are still carrying high-cost debt from peak yield periods. The “refinancing wall” looms for mid-size businesses, particularly those with rolling maturities in 2026-2027. Those unable to refinance on acceptable terms will need restructuring support or face failure, with rising borrowing costs remaining a key pressure
• Some forecasters expect a slight cooling in overall insolvency numbers. For instance, Allianz projects a ~3% decline in UK insolvencies in 2025, followed by a larger drop in 2026
• Cost structures remain under pressure from supply chain disruptions, wage inflation, energy volatility and commodity swings. Margins will remain tight, making even modest operational setbacks potentially fatal
• Government intervention may intensify in strategically important sectors. The Steel Industry (Special Measures) Act 2025 is already in force, allowing continued use of assets in failing steelmakers
• Compulsory liquidations have climbed – April 2025 saw the highest monthly level since 2014, which suggests more forceful enforcement, particularly by HMRC, as patience weakens.

Conclusion: early action is key

Business failures are likely to remain elevated over the next couple of years, but the pace should be steady rather than chaotic. This should mean that insolvency and restructuring work will remain busy, but predictable.

Early action will be key. Companies that seek advice at the first sign of trouble will have far more options to rescue or restructure than those that wait for creditors to act. For practitioners, that creates an opportunity to add real value – helping directors protect viable businesses, safeguard jobs and deliver better outcomes for creditors.

Sector pressures will continue to shift – from construction and retail today to real estate and logistics tomorrow. Staying alert to market changes will be vital. Firms that adapt quickly, communicate clearly and work collaboratively with lenders, investors and management teams will be the ones that stand out.

In short, the next phase is less about crisis response and more about practical problem-solving.