R3 report: Over 28,000 corporate insolvencies last year underline pressure on UK businesses

The Business Health report from R3, the UK’s trade body for restructuring, turnaround and insolvency professionals, provides an overview of the financial pressures facing UK businesses. Using data from CreditSafe, the report examines levels of insolvency and start-up activity, identifies sectors under ongoing financial strain, and explores the economic and operational challenges affecting businesses across the UK.

Sector pressures remain unstable

• Construction recorded the highest number of insolvency cases in 2025, with 4,584 businesses affected. Although numbers eased slightly from the previous year, the sector continues to face rising material costs, late payments, skills shortages and weak investor confidence.
• Wholesale and retail (4,124 cases) and accommodation and food services (3,831 cases) also saw high levels of insolvency activity, reflecting pressure on margins as consumers cut back on spending.
• Manufacturing remained under strain, with 2,188 insolvencies, driven by high energy costs, supply chain disruption and lower export demand.
• Water supply, waste management and remediation experienced an increase in insolvencies, rising to 172 cases, highlighting the impact of regulatory requirements and higher operating costs.

Regional insolvencies reflect unstable recovery

Focusing on our local regions, we continue to see variation in insolvency levels across the UK:

• Greater London recorded the highest number of insolvencies in 2025, with 5,684 cases, although numbers fell by 11% compared with the previous year.
• Insolvency activity across the South East, including the Thames Valley, Berkshire and Oxfordshire, has remained elevated despite a fall from the previous year, reflecting ongoing pressure from higher financing costs and reduced growth conditions.
• Whilst many regions have seen modest improvements, insolvency levels across London and the wider South East continue to remain stubbornly high.

Start-up activity slows

New business creation declined across the UK in 2025, signalling a more cautious approach from entrepreneurs. Start-up numbers in Greater London fell by 3% to 259,092, while the South East, also recorded a decline to 69,213 new businesses.

Overall trends point to persistent uncertainty, rising costs of finance and muted growth expectations, despite pockets of resilience elsewhere in the UK.

Tom Russell, President of R3 and Director in our Turnaround, Restructuring and Insolvency team, commented:

“Our analysis highlights the pressures businesses faced throughout 2025, with many operating under sustained strain as they tried to recover from several years of economic challenge. While insolvency activity eased slightly, levels remain high, with clear differences between sectors and regions driven by local economic conditions, access to finance and consumer demand.

Looking ahead to 2026, many businesses continue to face financial challenges in difficult market conditions. However, easing inflation and interest rate cuts provide some optimism that pressures may start to reduce. Margins remain tight, and seeking professional advice early from an R3 member can be critical to survival and recovery.”

During periods of financial pressure like these, early advice can make a real difference. Our Turnaround, Restructuring and Insolvency team works closely with businesses to stabilise cashflow, protect value and support recovery. Find out more about how we can help here.

For a full regional breakdown across the UK, read the R3 Annual Business Health Report here.