With hundreds of businesses going into liquidation or administration every year, business bankruptcy remains a significant economic concern in the UK. For entrepreneurs, investors, and legislators alike, recognising the scope of this issue and its causes, offers important insights.
Why Are Businesses Struggling in the UK?
While there isn't a single cause for business failures, there are a number of significant issues that are happening at one time.
1) A variety of economic issues affect UK companies, which contributes to their financial problems. High interest rates' ongoing effects have raised borrowing costs, reduced cash flows, and made it more difficult for businesses to pay down debt. Persistent inflation has further reduced profitability, particularly due to growing energy prices and salary demands.
2) Additionally, consumer confidence is weak. Businesses like retail, hospitality, and travel are particularly hard hit by lower discretionary expenditure as consumers become more guarded with their money. Non-essentials are often the first things to go when households cut back on spending.
3) Compulsory liquidations have also increased as a result of HM Revenue & Customs' stricter enforcement of outstanding tax debts. Post-pandemic supply chain disruptions are other issues that many businesses deal with.
4) And finally, persistent problems with the supply chain. Getting goods delivered on time and at a fair price remains a big challenge for many UK firms, even in the wake of Brexit and international shipping delays.
5) The rise in Employee National Insurance contributions is another increasing strain on employers. Payroll expenses have been under additional pressure in recent years due to increases in employer National Insurance rates, especially for small and medium-sized businesses. The related employment taxes increase in line with the rise in pay due to inflation and the need to retain talent. This extra financial strain makes it considerably harder for many thin-margin enterprises to keep staffing numbers stable, make growth investments, or withstand larger fluctuations in the economy. It has occasionally directly impacted choices about redundancies or company closures. In the autumn statement of 2024, the Chancellor increased not only the rate of employer national insurance from 13.8% to 15% but also reduced the threshold at which national insurance becomes payable on employee earnings down from £9,100 to £5,000.
Which Companies Are Making Redundancies?
Numerous companies have responded to the national insurance increase and other pressures by implementing cost-cutting strategies, such as redundancies. Leading companies include:
• Tesco is reorganising several aspects of its business.
• Royal Mail is cutting employees as mail volumes decline.
• British Gas is reducing its workforce in accordance with efficiency initiatives.
• Numerous real estate and construction firms are coping with decreased demand and growing expenses.
The retail, construction, finance, and logistics industries contribute to the majority of these reductions in staff, which is reflective of the overall slowdown in the economy.
How Many UK Businesses Fail?
In England and Wales, 23,872 businesses declared official insolvency in 2024, a 5% drop from 2023, in which 25,128 business were declared insolvent. This decline suggests a minor improvement in business stability, which may be the result of steady lending rates, lower inflation, or government support initiatives. Despite this, bankruptcy rates remain historically high, particularly when compared to pre-pandemic levels.
Listed below is the breakdown:
1. 18,840 Creditors’ Voluntary Liquidations (CVLs)
- Creditors' Voluntary Liquidations (CVLs) accounted for 18,840 cases in 2024, or roughly 79% of all insolvencies. Whilst this is significant, this was a minor decrease from 2023, where there were about 19,620 CVLs.
2. 3,230 Compulsory Liquidations
3. 1,597 Administrations
- Administrations decreased from 1,640 to 1,597, while mandatory liquidations also decreased slightly from 3,400 in 2023 to 3,230.
4. 202 Company Voluntary Arrangements (CVAs)
- It's interesting to note that the number of Company Voluntary Arrangements (CVAs) increased slightly from 190 in 2023 to 202 in 2024, indicating that more businesses chose to restructure rather than shut down completely.
5. 3 Receivership
- In 2024, there were only 3 receiverships, which is in line with the low numbers seen in prior years.
There were 1,971 firm bankruptcies in January 2025, which is 11% more than in January 2024. In England and Wales, the business liquidation rate in the 12 months leading up to January 2025 was 52.6 per 10,000 firms on the effective register, or around 1 in 190 companies going bankrupt .
What Companies Have Gone into Liquidation?
Recently, a number of well-known businesses have gone into administration or liquidation, including:
• Wilko: Announced closure and liquidation after entering administration in late 2023 and failing to find a buyer.
• Early in 2024, The Body Shop (UK operations) went into administration, which led to the closure of several stores.
• Made.com: cited declining demand and problems with the supply chain as justifications for going into administration in late 2023.
• Construction Companies: Fixed-price contracts and growing material costs have forced companies like Buckingham Group and Tolent Construction to go into liquidation
Furthermore, 45,416 UK companies were in "critical" financial difficulties as of March 31, 2025, according to a report by Begbies Traynor. This represents a 13.1% increase from Q1 2024 .
Although the number of corporate bankruptcies decreased somewhat in 2024, many UK enterprises' financial stability is still uncertain. Retail, hospitality, construction, and real estate are among the industries that continue to be impacted by economic headwinds like inflation, rising interest rates, and decreased consumer spending.
What Can Businesses Do to Survive?
It is more important than ever for businesses to take proactive measures to support their financial health in this challenging environment. Important tactics consist of:
1. Use effective cash flow management to guarantee that the company has enough cash on hand to withstand unforeseen setbacks.
2. Renegotiate conditions with lenders, landlords, and suppliers, particularly in cases where outdated contracts are unsustainable.
3. Seek professional advice early on, whether from bankruptcy practitioners, turnaround specialists, or accountants, before options become restricted.
The business marketplace in the UK is portrayed in a mixed manner by the statistics from 2024 and the initial half of 2025. Although a small drop in official insolvencies would indicate some stabilisation, a closer look shows that many businesses are still negotiating a difficult economic climate. Numerous industries continue to face operational challenges due to high interest rates, ongoing supply chain problems, decreasing consumer confidence, and persistent inflation.
