R3 Q1 2026 Business Health Report - More than 1.5m UK businesses carry overdue invoices as late payments increase

The Quarterly Business Health Report from R3, the UK’s trade body for restructuring, turnaround and insolvency professionals, examines the financial pressures facing UK businesses in the first quarter of 2026. Drawing on data from Creditsafe, the report highlights the growing impact of late payments on cashflows and patterns of insolvency related activity across sectors and regions.

Late payment pressures continue to build

Late payment pressures increased in Q1 2026, with the total number of overdue invoices rising to 17.48 million, up 3% on Q1 2025. The number of businesses carrying overdue invoices also increased to 1.57 million, adding further strain to company cashflows.

While insolvency related activity, including administrations and voluntary and compulsory liquidations, fell by 6% to 7,212 cases compared with Q1 2025, it rose by 9% compared with the final quarter of 2025. This increase indicates that financial pressure on businesses has intensified in recent months, despite activity remaining lower than the same period last year.

Sector distress remains focused

Construction remained the most distressed sector, with 1,159 insolvency related activities. Although activity fell compared with the previous year, the sector continues to account for a significant share of cases as firms face persistent cost and cashflow pressures.

Wholesale and retail recorded 975 cases, while accommodation and food services saw 923 insolvency related activities. Professional, scientific and technical services and administrative and support services also remained under strain. Real estate emerged as an area of growing concern, with cases rising sharply to 560 following a cluster of connected administrations.

South East pressures remain elevated

Positively for the South East Region, including the Thames Valley, Berkshire and Oxfordshire, Insolvency activity fell compared with the previous year. The region recorded 607 insolvency related cases in Q1 2026, down 10% on a year ago.

The number of businesses with late payments on their books also fell by 3%, however, many businesses across the South East continue to face pressure from late payments, higher financing costs and subdued growth conditions. More than 1.7 million overdue invoices were recorded across the region, a 3% increase from the same quarter a year ago, highlighting ongoing strain on cashflows, particularly for small and mid-sized businesses.

Tom Russell, President of R3 and Director at James Cowper Kreston, commented: “R3’s latest Business Health report reveals an early warning sign for UK businesses with late payment pressures rising. Late payments are a significant cause of company insolvencies and mounting arrears can quickly turn day to day cashflow issues into a wider crisis.

“This is particularly evident across the South East, where high levels of overdue invoices highlight the continued pressure facing many businesses. While insolvency related activity decreased over the quarter, compared to the same period in 2025, the underlying picture remains fragile. With the increasing burden on businesses of rising energy and fuel costs.  Businesses should prioritise credit control and seek professional advice early if they are struggling, before late payments and arrears become unmanageable.”

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 Quarterly Business Health Report here.