Q1 2025 Insolvency Comment - Decrease in insolvencies

25 April 2025

Attributed to Stephen Goderski, Partner at restructuring and insolvency firm PKF Littlejohn Advisory:

According to the latest government statistics for Q1 2025, the number of registered company insolvencies across the UK has reached 1,992, reflecting a fall of 2% compared to February 2025.  

Throughout the first quarter, the UK economy continued to face a series of domestic challenges, exacerbated by broader global instability and the actions of a hugely unpredictable US administration.

Inflation remains a significant issue, exerting pressure on purchasing power and complicating the financial environment for both consumers and businesses alike. The Consumer Prices Index (including owner-occupiers' housing costs) rose by 3.4% in the 12 months to March 2025, down from 3.7% in February. This slight easing is welcome, but the overall economic landscape remains precarious. Businesses continue to face enormous pressures, and the mood music from the US is obliging many companies that rely on international trade to re-assess their future credit and operational strategies.

Despite living ‘in interesting times’, and perhaps counter-intuitively, insolvencies have fallen. The fall, however, does not especially suggest a trend, and many companies are still under pressure, although there will always be businesses which can turn uncertainty to their advantage. For the rest -as well as managing inflation, increased employers’ National Insurance Contributions, higher minimum rates of pay and rising borrowing costs - cash management is key and that means customers paying regularly and on time. Boards have to ensure that every aspect of the business is functioning at near optimum level. For example, poor credit control leads to cash flow issues and slippage in the payment of suppliers, which can lead to supply issues. This can quickly become a slippery slope.

Uncertainty is the biggest ongoing threat, especially to those businesses seeking investment. Boards need to be agile and maintain options. It remains to be seen whether the government’s economic strategy will provide stability and economic growth, or whether further economic shocks will spiral into a recession.

So while a fall in insolvencies is always welcome, it may be a false dawn. For those businesses starting to experience cashflow issues, it is imperative that boards demonstrate their oversight by seeking early professional help. There may well be opportunities which will need to be explored but a responsible board will also prepare for the worst with robust contingency planning.