London, UK – The number of registered company insolvencies across England and Wales surged to 2,238 in May 2025, according to new data released by the government’s Insolvency Service. The figures underscore the persistent challenges facing businesses in a demanding economic environment, with the monthly total representing a significant increase compared to recent periods.
The May 2025 figure marks an 8% increase from the 2,074 insolvencies recorded in April 2025. More strikingly, it is 15% higher than the 1,946 insolvencies seen in May 2024, indicating a worsening trend over the past year as companies grapple with sustained pressures on their operations and profitability.
Rise in Insolvencies Detailed
The Insolvency Service data captures various forms of corporate failure, primarily Creditors’ Voluntary Liquidations (CVLs), which occur when directors choose to wind up a company because it cannot pay its debts. The consistent month-on-month and year-on-year rises suggest that a growing number of businesses are finding their financial positions untenable.
Mark Ford, a partner in the restructuring and recovery team at the professional services firm S&W, commented on the findings, stating that the data clearly reflects the challenging operating environment currently impacting businesses across the UK. His assessment highlights the link between macroeconomic conditions and the increasing rate of corporate failures.
Pressures on Profitability
A confluence of factors is contributing to the difficult trading conditions cited by Ford and reflected in the insolvency statistics. These include sluggish economic growth, which limits demand and revenue potential for businesses. High borrowing costs, a consequence of elevated interest rates aimed at controlling inflation, are making it more expensive for companies to finance operations, invest, or manage existing debt.
Furthermore, persistently low consumer confidence is dampening spending, adding another layer of pressure on businesses reliant on consumer demand. Although inflation has eased from its peak, the cumulative effect of high inflation over previous periods has eroded business cash reserves and increased operational expenses, making it harder for companies to maintain margins.
Mounting Cost Burden and Business Response
Beyond broader economic factors, businesses are also contending with specific increases in their cost base. These include rises in employer national insurance contributions, the statutory minimum wage, and business rates. These statutory costs add direct pressure on operating budgets, making it difficult for companies to absorb expenses or raise prices without risking alienating customers in a price-sensitive market.
This intense cost pressure is directly influencing business strategy and employment decisions. Research from S&W’s BOSS (Business Owners Sentiment Survey), which polled 500 UK business owners, found that over a third are planning further staff cuts. This response is primarily driven by the burden of increased employer national insurance contributions and other rising costs, as businesses seek to reduce overheads in the face of squeezed profitability.
Labour Market Reflects Weakness
The strain on businesses is also visible in the broader labour market landscape. Data from the Office for National Statistics (ONS) indicates a slowdown in recruitment activity across the UK economy. The number of job vacancies fell by 63,000 between March and May, signaling reduced demand for labour as companies become more cautious about hiring.
This cooling of the labour market is contributing to a rise in unemployment. The unemployment rate rose to 4.6% from 4.5%, the highest level seen in nearly four years. While still historically low compared to longer-term averages, this upward movement points to a potential softening in the jobs market as economic difficulties persist.
Broader Economic Picture
While wage growth has been a factor in inflation, the ONS data shows that average wage growth slowed slightly to 5.2% between February and April. Although this figure still exceeds April’s inflation rate of 3.5%, providing some relief to household purchasing power, the overall economic backdrop remains challenging.
The UK economy also shrank more than expected in April, according to separate data releases, adding to concerns about the country’s growth trajectory. Coupled with the continued low level of consumer confidence, the economic indicators paint a picture of vulnerability. The data collectively reinforces the assessment that the threat of recession remains present, casting a shadow over the outlook for businesses and the wider economy.
The increase in company insolvencies in May 2025 serves as a stark indicator of the economic challenges currently being navigated by UK businesses, with rising costs, cautious consumers, and high borrowing expenses continuing to take a toll.
