Corporate insolvencies in the UK increased by 6.4% in January 2025 from the previous month, according to the latest data from the Insolvency Service.
The total number of corporate insolvencies stood at 1,971 compared to December’s total of 1,852 and increased by 10.7% compared to January 2024’s figure of 1,780.
Company insolvencies in January 2025 consisted of 269 compulsory liquidations, 1,546 creditors’ voluntary liquidations (CVLs), 142 administrations and 14 company voluntary arrangements (CVAs). CVL and administration numbers were higher than in December 2024, while compulsory liquidations and CVAs were lower.
Tim Cooper, President of R3, the UK’s insolvency and restructuring trade body, and a partner at Addleshaw Goddard LLP, said: “The monthly and yearly rise in corporate insolvencies is down to an increase in the number of Creditors’ Voluntary Liquidations and Administrations.
“That would suggest that directors may be choosing to close down their firms after years of challenging trading conditions and ahead of the increase in the National Minium Wage and Employers’ National Insurance Contributions in April, and this has pushed corporate insolvency levels to the highest we’ve seen in January in more than five years.
“However, there is some positive news in the form of the increase in Administration numbers – to a figure that’s higher than this time last month and this time last year – as it suggests that there are more companies that have the potential to be rescued via a sale out of Administration.
“Creditor pressures and ongoing cost issues are continuing to drive corporate insolvencies. A long period of rising expenses coupled with consumers’ reluctance to spend is continuing to take a toll on businesses, and creditors have now largely abandoned the benign attitude they had in the aftermath of the pandemic as they attempt to manage their own debts. We’ve also seen HMRC return to its pre-pandemic approach of pursuing money it’s owed after years of taking a more supportive stance during and after the COVID era.
“On top of this, firms across a number of sectors haven’t had the results from the Golden Quarter they were hoping for. Retailers have seen an increase in sales but this has largely been driven by discounts and deals, and the construction sector has been affected by the weather, client caution around commissioning projects and ongoing rises in costs. The hospitality sector has also failed to see the rise in revenues it was hoping for at Christmas, although pubs and bars had a better start to the year than expected after many adapted their offerings to accommodate Dry January.
“Looking at the wider economy, the projected cut in growth has had an impact on business confidence and led to many directors and management teams becoming unsure about investment or business growth this year, as well as reducing firms’ willingness to invest in growing their workforces ahead of the increase in National Minimum Wage and Employers’ National Insurance Contributions in April. However, this has also led to the Monetary Policy Committee cutting the base rate of interest, which should improve access to rescue finance.
“Against this backdrop, I would expect to see an increase in demand for restructuring advice and support, as firms consider their options ahead of the end of the financial year, and with cost and creditor pressures unlikely to ease in the short-term,” Cooper concluded.
