R3 report: Business failures fall as appetite for start-ups weakens
The number of UK businesses entering insolvency-related processes fell in the second quarter of 2026, but a decline in new company registrations suggests business confidence remains subdued, according to R3’s report.
R3’s latest Quarterly Business Health report, based on data from Creditsafe found there were 6,854 insolvency-related activities in Q2 2026, down 6% compared to the same period last year and 5% lower than the previous quarter.
At the same time, 184,873 new UK companies were registered during the quarter, a 6% decrease on Q2 2025 and 2% lower than Q1 2026.
The findings point to a business landscape where fewer firms are entering formal distress processes, but where entrepreneurs remain cautious about launching new ventures.
R3 president and partner at Knights, Sonia Jordan comments: ‘R3’s latest Business Health report shows a mixed picture of the UK economy. The decline in new companies being formed suggests that many would-be entrepreneurs are taking a wait-and-see approach.
‘While insolvency-related activity has fallen, businesses continue to face a range of pressures, from higher employment costs and ongoing geopolitical uncertainty to concerns around consumer demand and cashflow. These factors can all make launching a new business feel like a greater risk than it might have done previously.
‘Although fewer failures are welcome, sustainable economic growth requires both resilient businesses and a healthy pipeline of new enterprises entering the market.’
Construction remained the sector with the highest level of insolvency-related activity in Q2, with 1,177 cases, followed by accommodation and food services (935) and wholesale and retail (885). Although all three sectors recorded year-on-year reductions in insolvency activity, they continue to account for a significant proportion of cases.
The report also highlights growing pressures in some parts of the economy. Insolvency-related activity among financial and insurance businesses increased by 19% year-on-year to 194 cases, while the real estate sector saw cases rise by 16% in the first half of 2026 compared with the same period in 2025.
Regionally, Greater London recorded the highest number of new businesses, with 62,853 start-ups, followed by East Anglia (21,353) and the North West (18,875). However, every UK region saw a year-on-year decline in start-up activity, with the sharpest falls recorded in Northern Ireland (-15.7%), Wales (-15.1%) and the North East (-9.0%).
Greater London also recorded the highest level of insolvency-related activity, with 1,461 cases, followed by the North West (1,044) and East Anglia (914). Most regions experienced year-on-year declines in insolvency activity, led by Wales (-22.0%), the North West (-17.5%) and Northern Ireland (-14.3%).
Sonia Jordan added: ‘Businesses should continue to monitor cashflow carefully and seek professional advice early from an R3 expert if they are struggling.’