R3 report: Over 28,000 corporate insolvencies last year underline pressure on UK businesses
UK businesses continued to face intense financial pressure throughout 2025, with 28,616 insolvency activities recorded, while start-ups declined, according to a new report from R3.
While corporate insolvency-related activities – including administration and voluntary and compulsory liquidations, eased slightly compared with 2024, when there were 29,366 instances, they remain significantly above pre-pandemic norms, reflecting a fragile operating environment for many businesses.
Tom Russell, president of R3, the trade body for restructuring, turnaround and insolvency professionals, 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, particularly for smaller and mid-sized firms with limited financial headroom.”
R3’s Annual Business Health report looks at trends such as insolvency and start-up activity and sector failures throughout the UK, using data from CreditSafe. Findings include:
Sector pressures remain uneven
- Construction continued to account for the highest number of insolvency activities in 2025 (4,584 cases), despite a modest reduction of 6% on the previous year. The sector is exposed to rising material costs, delayed payments, skills shortages and weak investor confidence.
- Wholesale and retail (4,124 cases) and accommodation and food services (3,831 cases) also saw elevated insolvency activity numbers, reflecting pressure on margins as households rein in discretionary spending and businesses struggle to absorb or pass on higher costs.
- Manufacturing insolvencies remain historically high with 2,188 cases, as companies contend with energy costs, supply chain disruption and subdued export demand.
- Water supply, waste management and remediation saw a 14% increase in insolvency activity rising to 172 in 2025, highlighting the impact of regulatory pressure and rising operating costs.
Regional insolvencies reflect patchy recovery
- Greater London recorded the highest number of insolvencies in 2025 (5,684 cases), which is partly explained by the greater number of companies in the region. Encouragingly cases decreased by 11% on the previous year.
- The North West (4,880 cases), East Anglia (3,812 cases) and West Midlands (3,152 cases) also saw high levels of insolvency activity, driven by exposure to manufacturing, construction and retail.
Start-up activity declines
- New business formation slowed across much of the UK in 2025, suggesting a more cautious entrepreneurial environment. Greater London start-ups fell by 3% to 259,092 on the previous year, while Yorkshire and Humberside, Northern Ireland and the East Midlands saw the largest declines.
- Wales and Scotland bucked the trend with modest growth along with several English regions including the North West and North East, pointing to pockets of resilience.
Tom Russell, who is also a licensed insolvency practitioner and director at James Cowper Kreston, concluded: “As we move into 2026, it’s evident that many businesses are operating with limited financial resilience amid tough market conditions. While margins remain under pressure, seeking professional advice at an early stage from an R3 member can make a critical difference, giving viable businesses the best chance of survival and recovery.”
Read the R3 Annual Business Health report here.