As 2025 draws to a close, the UK insolvency landscape continues to reflect rising financial stress and lingering instability across the economy. While the Chancellor’s Autumn Budget aimed to signal renewed stability, persistent inflation and the cost-of-living crisis are still placing significant pressure on both businesses and individuals.

Overall, the latest data from the Insolvency Service, combined with developments across key sectors, make one thing clear: insolvency risk is increasingly concentrated and unevenly distributed.

Personal insolvencies: pressure remains high

Personal financial strain shows little sign of easing. Although month-to-month fluctuations occur, personal insolvency volumes remain elevated compared with recent years. Individual Voluntary Arrangements continue to dominate the landscape, suggesting many people prefer structured, longer-term arrangements over bankruptcy, while rising use of Debt Relief Orders reflects growing vulnerability among lower-income households. Bankruptcy volumes remain comparatively low but have been edging upward as savings buffers shrink and household budgets tighten.

Business insolvencies: persistent stress across sectors

Corporate insolvency activity has remained high throughout 2025, broadly in line with 2023 and 2024 levels. Creditor pressure, particularly from HMRC, has intensified enforcement action, while Creditors’ Voluntary Liquidations continue to be the primary route for distressed SMEs facing cashflow shortages, rising input costs and unsustainable debt.

Although the annual insolvency rate has dipped slightly, this is largely due to the increasing number of companies on the register rather than any material improvement in business performance.

Sector-by-sector pressures

Retail and hospitality
Retail remains one of the hardest-hit sectors, driven by reduced consumer spending, high property costs and continued competition from online operators. Hospitality faces similar challenges, with rising wages and energy costs leaving many businesses trading on extremely thin margins. Seasonal trading may offer short-term relief, but structural pressures persist.

Construction
Construction insolvencies remain elevated, with subcontractors particularly exposed. Fixed-price contracts agreed before inflation surged continue to erode margins, and cashflow gaps between supplier payments and delayed receipts from main contractors are proving fatal for many smaller firms.

Administrative and support services
Rising overheads and economic uncertainty have weighed heavily on this sector, where many businesses struggle to adapt business models quickly enough to remain viable.

Professional, scientific and technical services
Higher operating costs and reduced client spending in certain specialisms are creating challenges, especially for smaller firms that lack financial resilience.

Manufacturing
Manufacturers continue to contend with high energy and material costs, global supply chain disruption and new trade barriers, which together have severely strained working capital across the sector.

Heavy industry and energy
This year saw several high-profile failures, underscoring structural fragilities. Ageing infrastructure, intense international competition and tighter financing conditions continue to put significant pressure on these essential industries.

Looking ahead to 2026

Our restructuring and insolvency specialists identify several themes to watch:

  • Retail and hospitality are likely to remain high-risk if consumer spending remains subdued.
  • Construction faces ongoing vulnerability, with financing constraints and slow housebuilding activity.
  • Emerging growth sectors, such as renewables and digital services, offer opportunities but also new challenges around valuing assets and assessing risk.
  • Late payments will continue to drive distress, particularly in supply-chain-dependent sectors such as construction, logistics and wholesale.

As we enter 2026, advisers will need to remain vigilant and spot the warning signs to take action quickly. For more information on our Restructuring and Insolvency services please get in touch.