New analysis of official Insolvency Service data reveals the sharpest rise in compulsory liquidations since records began — and why the worst may not be over yet.
If you run a UK business, the latest insolvency figures should command your attention. Not because business failures are at an all-time high — they’re not — but because the way businesses are failing has changed dramatically, and the shift has profound implications for every company carrying debt, deferring tax, or operating on tight margins.
The headline numbers tell a story of apparent stability. England and Wales recorded 23,938 total company insolvencies in 2025, fractionally above the 23,880 registered in 2024 and below the 30-year high of 25,164 set in 2023. If you stopped there, you might conclude the worst had passed.
You’d be wrong.
Behind that plateau, one number has been climbing with alarming consistency: compulsory liquidations. These are not businesses choosing to close. These are businesses being forced to close by their creditors — overwhelmingly by HMRC — through the courts. And the scale of the increase is extraordinary.
Source: Insolvency Service, Company Insolvency Statistics, January 2026 release (Accredited Official Statistics)
The Number That Should Stop You in Your Tracks
In 2021, just 491 companies in England and Wales were compulsorily wound up. That was a record low, suppressed by pandemic-era restrictions on winding-up petitions and HMRC’s temporary pause on enforcement.
By 2025, that number had risen to 3,730.
That’s a 660% increase in four years. It means creditors are now forcing more than ten businesses a day into closure through the courts — the highest rate since 2012 and approaching levels last seen during the 2008-09 financial crisis.
Here’s the full trajectory, all from the Insolvency Service’s official Table 1a data:
| Year | Compulsory Liquidations | Year-on-Year Change | Cumulative Change from 2021 |
| 2021 | 491 | Record low (pandemic) | — |
| 2022 | 1,969 | +301% | +301% |
| 2023 | 2,839 | +44% | +478% |
| 2024 | 3,239 | +14% | +560% |
| 2025 | 3,730 | +15% | +660% |
Source: Insolvency Service, Table 1a, Company Insolvency Statistics (England and Wales). Year-on-year % changes confirmed in official commentary.
To put this in context: during the depths of the 2008-09 financial crisis, compulsory liquidations peaked at 5,643. Today’s figure of 3,730 is already two-thirds of that crisis-era peak — and it’s climbing against a very different backdrop. This isn’t a banking collapse. It’s a grinding combination of tax enforcement, cost inflation, and creditor impatience.
What’s Driving This Surge?
The 660% rise doesn’t have a single cause. It’s the result of several pressures converging simultaneously, each of which would be manageable in isolation but which together are proving devastating for businesses already operating on the edge.
1. HMRC Has Stopped Waiting
During the pandemic, HMRC effectively hit pause on enforcement. Winding-up petitions were restricted by law between March 2020 and March 2022, bounce-back loans provided emergency liquidity, and tax liabilities were deferred under Time to Pay arrangements.
That forbearance is over. In 2025, 6,881 winding-up petitions were filed in the High Court. HMRC is responsible for an estimated 60% of all petitions, making the tax authority by far the single largest driver of forced company closures in the UK.
Many of these petitions relate to debts that accumulated during the pandemic. Businesses deferred VAT, PAYE, and corporation tax in 2020 and 2021, fully intending to catch up. Many never did. The debt sat on HMRC’s books, accruing interest, and when Time to Pay arrangements were breached or ignored, the enforcement machinery began to move.
“A lot of businesses treated pandemic-era tax deferrals as free money. They weren’t. HMRC kept a tally, and now the bill is due. We’re seeing clients who deferred £30,000 or £40,000 in VAT during 2020 and never caught up. When HMRC files a winding-up petition, it’s usually the final step in a process the business owner has been ignoring for months.”
— Gary Hemming, Commercial Lending Director, ABC Finance Ltd
HMRC’s position has been strengthened by its restoration as a preferential creditor in December 2020. This means HMRC now ranks ahead of unsecured creditors in an insolvency, giving it a greater financial incentive to pursue enforcement — because it recovers more from the process.
Source: High Court filings 2025; Insolvency Act 1986 (as amended by Finance Act 2020)
2. The National Insurance Squeeze
From April 2025, employer National Insurance contributions rose from 13.8% to 15%, while the threshold at which contributions become payable dropped sharply from £9,100 to £5,000 per employee. These two changes together represent one of the most significant increases in employment costs in recent memory.
The numbers are stark. According to the Centre for Policy Studies, employer NI costs for a single minimum-wage employee have risen from £1,617 to £2,583 — a 60% increase. For a business with 20 employees on an average UK salary of £30,000, the additional annual NI bill exceeds £10,000.
A survey by the British Chamber of Commerce found that 82% of firms said the NI increase would impact their business, with 58% expecting it to affect recruitment and 54% anticipating price increases to offset costs. For businesses already carrying pandemic-era debt and struggling with weak demand, this additional burden has pushed many past the tipping point.
Source: Centre for Policy Studies; British Chamber of Commerce NI Survey 2025; Sage UK employer NI analysis
3. Late Payments and Tightening Credit
Late payments currently cost the UK economy over £10 billion a year and affect more than 1.5 million businesses, according to government estimates. For SMEs waiting 60, 90, or even 120 days for invoices to be settled, the cash flow gap can be fatal — particularly when their own creditors, including HMRC, are no longer prepared to wait.
Access to credit has also tightened considerably. Banks have raised lending thresholds and increased interest rates, reducing the options available to businesses needing short-term funding to bridge cash flow gaps. For smaller firms without significant assets or strong balance sheets, the traditional safety net of a business overdraft or short-term facility is increasingly out of reach.
“Cash flow kills more businesses than lack of profit. A company can be technically profitable on paper and still be pushed into insolvency because it can’t collect what it’s owed fast enough to pay what it owes. When you combine late-paying customers with an impatient HMRC and a bank that won’t extend your overdraft, you’re in serious trouble very quickly.”
— Gary Hemming, Commercial Lending Director, ABC Finance Ltd
Which Sectors Are Most Exposed?
The Insolvency Service’s sector data for 2024 (the most recent full-year industry breakdown available) reveals where the pain is concentrated:
| Sector | Insolvencies (2024) | Share of Total |
| Construction | 4,393 | 18.4% |
| Wholesale & Retail Trade | 3,578 | 15.0% |
| Accommodation & Food Services | 3,081 | 12.9% |
| Administrative & Support Services | 2,306 | 9.7% |
| Manufacturing | 1,929 | 8.1% |
| Professional, Scientific & Technical | 1,726 | 7.2% |
| Information & Communication | 1,508 | 6.3% |
Source: Insolvency Service, Table 1c (Industry tables), England and Wales, 2024 calendar year
These seven sectors account for nearly 78% of all business failures. They share common characteristics: labour-intensive operations, thin margins, sensitivity to consumer spending, and heavy exposure to the April 2025 NI and minimum wage increases.
Construction leads the table for the same reasons it has for years — long payment chains, fixed-price contracts, and heavy reliance on subcontractors who are themselves under financial pressure. When one link in the chain fails, the ripple effect can bring down multiple businesses.
The hospitality sector continues to be hammered by a combination of rising employment costs, reduced business rate relief (cut from 75% to 40% in April 2025), and weakening consumer confidence. The Centre for Retail Research has predicted 17,350 retail store closures across 2025.
Perhaps most concerning is the emergence of stress in sectors that should theoretically be better positioned — professional services, technology, and information and communication. These sectors saw an 8% increase in insolvencies in 2024, and Kroll’s restructuring data shows media and technology administrations surging 50% in the same year.
45,000 SMEs in Critical Financial Distress
The insolvency figures themselves represent only the most severe outcome. Beneath the surface, a far larger cohort of businesses is in serious trouble.
According to the Business Distress Index published by Real Business Rescue, 45,416 SMEs were in critical financial distress in Q1 2025 — a 13% increase on the same period in 2024. Critical distress is defined as severe deterioration in working capital, retained profits, and net worth. A further 579,276 companies were in significant financial distress.
London recorded the highest concentration, with 14,889 companies in critical distress — a 23% rise year on year. The South East followed with 6,860 SMEs in critical distress. The sectors showing the fastest deterioration included hotels and accommodation, real estate, and leisure and cultural activities.
These businesses haven’t entered formal insolvency proceedings yet. But they represent the pipeline — the companies most likely to appear in next year’s statistics unless they take action now.
Source: Real Business Rescue, Business Distress Index Q1 2025 (Companies House / Red Flag Alert data)
The Rescue Gap: Why Businesses Are Dying Instead of Recovering
One of the most troubling patterns in the data is the growing gap between businesses that enter rescue procedures and those that go straight to liquidation.
Administration is designed as a rescue mechanism. It gives a viable business breathing space from creditors while an insolvency practitioner explores options for restructuring, sale, or turnaround. In 2025, there were just 1,495 administrations in England and Wales.
Compare that with 18,525 creditors’ voluntary liquidations and 3,730 compulsory liquidations. For every business entering a formal rescue process, more than fourteen were being wound up. In 2019, the ratio was significantly healthier.
The implication is clear: by the time most businesses reach formal insolvency, they’re already past the point of rescue. The window for intervention has closed, and the only remaining option is closure.
This is particularly stark in Northern Ireland, where compulsory liquidations hit 190 in 2025 — actually overtaking CVLs (114) for the first time. More Northern Irish businesses were forced to close by creditors than chose to close voluntarily.
“The pattern we see repeatedly is directors waiting too long. They ignore the first HMRC letter, don’t respond to the statutory demand, and by the time they call us, there’s a winding-up petition lodged and their bank account is frozen. At that point, the options are severely limited. Six months earlier, we could have arranged refinancing, negotiated a Time to Pay agreement, or explored administration. By the time the petition is filed, it’s usually too late.”
— Gary Hemming, Commercial Lending Director, ABC Finance Ltd
What Actually Happens When HMRC Comes Knocking
For many business owners, the process of compulsory liquidation remains abstract until it happens to them. Here’s what the timeline typically looks like:
Stage 1 — The debt accumulates. HMRC sends reminders for unpaid VAT, PAYE, or corporation tax. Many business owners ignore these, assume they’ll catch up, or simply don’t have the cash to pay.
Stage 2 — The statutory demand. HMRC issues a formal statutory demand, giving the company 21 days to pay or reach an agreement. This is the critical intervention point. Engaging at this stage gives you the widest range of options.
Stage 3 — The winding-up petition. If the statutory demand is ignored, HMRC files a petition in the High Court. Once filed, this triggers immediate consequences: banks typically freeze the company’s accounts (to protect themselves under Section 127 of the Insolvency Act), suppliers withdraw credit, and the petition is advertised in The Gazette for the world to see.
Stage 4 — The hearing. Around eight to ten weeks after filing, the petition is heard. If the court grants a winding-up order, the company ceases to trade. The Official Receiver is appointed. Directors lose all control.
Stage 5 — Investigation. The Official Receiver investigates director conduct for up to three years prior to liquidation. If evidence of wrongful trading, preference payments, or misconduct is found, directors face personal liability, disqualification for up to 15 years, and potential compensation orders.
The entire process from statutory demand to winding-up order can take as little as three months. For many directors, the first real moment of crisis comes when they discover their bank account is frozen — often before the hearing has even taken place.
Source: Insolvency Act 1986; The Gazette; Insolvency (England and Wales) Rules 2016
PwC’s Warning: The Worst May Still Be Ahead
If the current trajectory isn’t concerning enough, consider this: PwC has warned that a lag of 18 to 24 months typically exists between changes in macroeconomic conditions and their impact on corporate insolvencies.
The most significant cost increase — the April 2025 employer NI rise — has been in effect for less than a year. The full impact of that change, combined with minimum wage increases and reduced business rate relief, may not be fully reflected in the insolvency statistics until late 2026 or early 2027.
The insolvency rate currently stands at 51.7 per 10,000 companies on the effective register. That’s significantly above the pre-pandemic rate of approximately 46 per 10,000, but still well below the 113.1 per 10,000 seen during the 2008-09 crisis. However, the absolute number of failures is higher than it was then, because the Companies House register has more than doubled in size. There are simply more businesses at risk.
Source: PwC Restructuring Insights Q2 2024; Insolvency Service rate calculations
What You Should Do Right Now
If any of the following applies to your business, you need to take action:
You owe HMRC money and don’t have a formal payment plan in place. This is the single biggest risk factor. HMRC’s enforcement pipeline is active, and debts that accumulated during the pandemic are squarely in the crosshairs. If you haven’t already, contact HMRC to discuss a Time to Pay arrangement before they contact you. Once a statutory demand is issued, your options narrow considerably.
Your cash flow is deteriorating and you’re relying on credit to cover day-to-day costs. Persistent cash flow problems are the single most common precursor to insolvency. Review your debtor book aggressively, renegotiate payment terms with key suppliers, and consider whether asset-based lending or invoice finance could bridge the gap.
You’ve not yet calculated the impact of the April 2025 NI changes on your margins. If you employ staff and haven’t modelled what the increased employer NI rate and lower threshold means for your annual wage bill, do it now. For many businesses, the impact is significantly larger than the headline 1.2% increase suggests, particularly for those with large numbers of lower-paid employees.
You’re in construction, hospitality, retail, or any labour-intensive sector. These sectors account for nearly half of all insolvencies. If your margins are below 5%, you are in the danger zone. Consider whether your pricing reflects current costs, and model what happens if you lose a key customer or contract.
You’re putting off difficult decisions. The data is unambiguous: directors who seek advice early have more options and better outcomes. Those who wait until a winding-up petition arrives typically have none. If you’re worried, the time to act is now, not in six months.
“The businesses that survive periods like this aren’t necessarily the most profitable or the best funded. They’re the ones that face their numbers honestly, engage with creditors proactively, and get advice early. Every week you delay narrows your options. If you’re reading this and recognising your situation, pick up the phone.”
— Gary Hemming, Commercial Lending Director, ABC Finance Ltd
Your Options: From Strongest to Last Resort
The good news is that businesses in difficulty have more formal options available to them than many directors realise. The key is engaging early enough that the stronger options remain on the table.
Refinancing and bridging finance. If the underlying business is viable but facing a short-term cash crunch, refinancing existing debt or securing a bridging facility can provide the breathing room needed to stabilise. This works best when the business has assets (property, equipment, receivables) and the cash flow problem is temporary.
Time to Pay (TTP) arrangements with HMRC. HMRC will negotiate structured repayment plans for tax debts, typically over 6 to 12 months. The critical requirement is engaging early and honestly. A credible repayment proposal backed by cash flow forecasts is far more likely to succeed than a last-minute plea after a statutory demand.
Company Voluntary Arrangement (CVA). A CVA allows a company to restructure its debts through a formal proposal to creditors, requiring 75% approval. It enables directors to retain control of the business while repaying a proportion of what’s owed over a fixed period. CVAs are particularly useful for businesses with a viable core operation but unsustainable debt levels.
Administration. If the business needs protection from creditors while a rescue plan is developed, administration provides a legal moratorium. An insolvency practitioner takes control and explores options including restructuring, sale as a going concern, or a pre-pack sale. This preserves value and often saves jobs.
Creditors’ Voluntary Liquidation (CVL). If the business is no longer viable, a CVL allows directors to close it in an orderly manner, on their own terms. This is preferable to compulsory liquidation because it gives directors more control, reduces the risk of adverse conduct findings, and typically produces better outcomes for creditors.
Compulsory liquidation. This is the option you want to avoid at all costs. It means a creditor has petitioned the court to close your business. You lose control completely, your bank accounts are frozen, and the Official Receiver investigates your conduct. The personal consequences for directors — including potential disqualification and liability — are at their most severe.
The Bottom Line
The 660% increase in compulsory liquidations between 2021 and 2025 is not a statistical anomaly. It represents a fundamental shift in how creditors — particularly HMRC — are dealing with businesses that can’t pay their debts. The era of pandemic forbearance is over, and the enforcement regime that has replaced it is aggressive, well-resourced, and accelerating.
Combined with the April 2025 employer NI increases, persistent inflation, and tightening credit conditions, the environment for UK businesses — particularly SMEs — is as challenging as anything since the 2008-09 financial crisis. And PwC’s warning about the 18-24 month lag suggests we haven’t yet seen the full impact.
But the data also shows something else: the businesses that fail are overwhelmingly the ones that didn’t seek help in time. The intervention points exist. The rescue mechanisms work. The finance options are available. But they only work if you act before the winding-up petition lands.
If you’re a business owner with concerns about cash flow, tax debts, or rising costs, ABC Finance can help. We provide bridging loans, commercial mortgages, and development finance to businesses across the UK, and we understand the pressures you’re facing. Get in touch for a confidential conversation about your options.
Sources and Data
All insolvency statistics cited in this article are drawn from the Insolvency Service’s official monthly and annual releases, designated as Accredited Official Statistics by the Office for Statistics Regulation. Key sources:
• Insolvency Service: Company Insolvency Statistics, January 2026 (Tables 1a, 1c)
• Insolvency Service: Official Commentary, January 2026 (confirms 15% YoY compulsory liquidation increase; highest since 2012)
• Insolvency Service: Official Commentary, December 2024 (confirms 14% YoY increase for 2024)
• Insolvency Service: Official Commentary, Q4 2022 (confirms 44% YoY increase for 2023; “record low” in 2021)
• Real Business Rescue: Business Distress Index Q1 2025
• British Chamber of Commerce: NI Impact Survey 2025
• Centre for Policy Studies: Employer NI Cost Analysis
• PwC: Restructuring Insights Q2 2024
• High Court winding-up petition filings, 2025 calendar year
All data is publicly available at gov.uk/government/collections/company-insolvency-statistics and can be independently verified.
About the author
Gary has over 15 years’ experience in financial services and specialises in bridging loans, commercial mortgages, development finance and business loans. He is widely respected in his field and regularly provides expert commentary for specialist trade publications, specialist business publications as well as local and national press.
