Insolvency rates increase as Middle East tensions threaten to undermine economic stability
Commenting on the Insolvency Service’s monthly insolvency statistics for England and Wales, R3, the UK’s trade body for restructuring, turnaround and insolvency professionals, warned that worsening geopolitical tensions in the Middle East risk adversely impacting insolvency trends over the coming months, reversing recent signs of economic stability.
Tom Russell, R3 president commented: “Corporate insolvencies increased by 7% in February, compared to the previous month, rising to 1,878 cases, although they were 7% lower than the same month in 2025. These consisted of 249 compulsory liquidations, 1,473 creditors’ voluntary liquidations (CVLs), 146 administrations and 10 company voluntary arrangements (CVAs). Meanwhile, personal insolvency rates are increasing with debt relief orders hitting a 17-year high.
“While today’s figures pre-date the current Middle East conflict, the rise in energy and fuel prices we are now seeing will inevitably mean a very shaky start to the quarter for many companies. Despite economic activity stalling in January, there had been some signs of stability returning to the economy, but the situation in the Middle East has delivered a fresh shock to businesses and households.
“The fallout from this geopolitical uncertainty risks hitting consumer spending, business confidence and investment decisions, and reduces the likelihood of interest rates coming down when the Bank of England makes their decision later this week.
“Sectors with high energy usage or thin margins, including hospitality such as hotels and restaurants, may be particularly exposed, and could feature more prominently in the insolvency figures as the year progresses.
“We’re already seeing business owners becoming more cautious about investment decisions, choosing to wait and see rather than commit while costs and demand remain uncertain. That hesitation, combined with rising overheads, means some businesses that were just about coping may now find themselves under renewed strain. This is likely to have a knock-on effect to insolvency rates in the coming months as higher costs make their way through to supply chains and balance sheets.”