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Number of individuals and companies going insolvent increases: "The UK economy is flashing red"

ended 19. September 2025

THE number of individuals and companies that have gone insolvent has soared with experts warning the UK economy is “flashing red”.

In August 2025, 11,348 individuals entered insolvency in England and Wales. This was 7% higher than in July 2025 and 16% higher than in August 2024.

The number of registered company insolvencies in England and Wales was 2,048 in August 2025, 2% lower than in July 2025 when it was 2,083, and 6% higher than the same month in the previous year when it was 1,933. 

Monthly company insolvency numbers in the first eight months of 2025 were slightly higher than in 2024 and at a similar level to 2023, which saw a 30-year high annual number of insolvencies.

Eamonn Prendergast, Chartered Financial Adviser at Bromley-based Palantir Financial Planning Ltd, said the UK economy is “flashing red”.

He said: "Insolvencies are flashing red as a barometer of the wider economy. When 11,000 individuals and over 2,000 companies go under in a single month, it’s not just about bad business decisions, it’s about households under pressure, rising borrowing costs, and growth stuck in neutral. 

"Debt Relief Orders hitting record highs show how ordinary people on modest incomes are being tipped over the edge by inflation that hasn’t eased and wages that haven’t stretched. At the same time, firms face higher costs, fragile demand, and no clarity on when interest rates will fall."

Harry Mills, Director at London-based Oku Markets, blamed the Labour government.

He said: “Rising insolvencies is a function of the deliberately oppressive and challenging environment cultivated by this Labour government. Things will get tougher, with a heavy, and set to rise, tax burden.”

Daniel Wiltshire, Actuary & IFA at Bradford-on-Avon-based Wiltshire Wealth, fears the UK is already in a recession.

He added: "The numbers are worrying, but reports on the ground are even worse. Business owners say conditions are the toughest in memory. Construction firms - an economic bellwether - paint a particularly gloomy picture. We may already be in recession, the statistics just haven’t caught up yet."

Clive Bonny, MD at Strategic Management Partners, added: "My home town Brighton now has more failures than startups. The loss of small enterprise grants has reduced access to professional advisors like myself for business continuity planning, risk management and IP protection. 

"Startups and micro firms need this support. Just £1,000 can identify and plug critical risks. These grants should be channelled via regional Chambers of Commerce who have well established business networks and qualified advisors. Local councils were given £2.5billion for SME support three years ago but sadly much was wasted in managing funds with too few audits. 

“UK Government, please use regional Chamber resources already in place to give our four million small enterprises and out of work entrepreneurs the chance to survive and scale up.”

Michelle Lawson, Director at Fareham-based Lawson Financial, blames Chancellor Rachel Reeves.

She added: "Sadly, this is not a shock but still makes grim reading. Rampaging Reeves is putting the kybosh on 2,048 small businesses, most of which will have employees that they have let go. 

“They will either enter the benefits system or be desperately trying to find jobs to pay the extortionate bills and hiked other costs as a result of the government's economic disaster. These are sad depressing numbers which will only increase further if the chancellor's carriage of destruction continues on the railroad.”

Samuel Mather-Holgate, Independent Financial Adviser at Swindon-based Mather and Murray Financial, added: “Changes to National Insurance for businesses have really hit hard. Not only does it mean thriving businesses cannot expand at the rate they want to, and create the growth in the economy that the Chancellor desperately prays for, but it also means those struggling to stay above the waves have just got a mouth full of water. 

"While Reeves could reform business rates and corporation tax to favour small businesses, she's decided to use all corporate taxes as a revenue raiser, and these figures show the effects of doing so.”

9 responses from the Newspage community

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Editor
Eamonn Prendergast
Chartered Financial Adviser at Palantir Financial Planning Ltd
Insolvencies are flashing red as a barometer of the wider economy. When 11,000 individuals and over 2,000 companies go under in a single month, it’s not just about bad business decisions, it’s about households under pressure, rising borrowing costs, and growth stuck in neutral. Debt Relief Orders hitting record highs show how ordinary people on modest incomes are being tipped over the edge by inflation that hasn’t eased and wages that haven’t stretched. At the same time, firms face higher costs, fragile demand, and no clarity on when interest rates will fall.
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Editor
Michelle Lawson
Director at Lawson Financial
Sadly, this is not a shock but still makes grim reading. Rampaging Reeves is putting the kybosh on 2,048 small businesses, most of which will have employees that they have let go. They will either enter the benefits system or be desparately trying to find jobs to pay the extorniate bills and hiked other costs as a result of the governments economic disaster. These are sad depressing numbers which will only increase further if the Chancellors carriage of destruction continues on the railroad.
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Editor
Tony Redondo
Founder at Cosmos Currency Exchange
The last Budget's National Insurance increase on employers was essentially a tax on jobs. It's therefore unsurprising that these figures show individual vulnerability, with a significant 16% year-on-year increase in personal insolvencies reflecting household financial stress from high living costs, rising mortgage rates, and squeezed disposable income. Many individuals have reached their financial breaking point. When viewed alongside employment data, consumer spending patterns, and business confidence indicators, these figures suggest an economy in serious decline.
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Editor
Samuel Mather-Holgate
Managing Director & IFA at Mather and Murray Financial
Changes to National Insurance for businesses have really hit hard. Not only does it mean thriving businesses cannot expand at the rate they want to, and create the growth in the economy that the Chancellor desperately prays for, but it also means those struggling to stay above the waves have just got a mouth full of water. While Reeves could reform business rates and corportation tax to favour small businesses, she's decided to use all corporate taxes as a revenue raiser, and these figures show the effects of doing so.
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Editor
Pete Mugleston
Mortgage Advisor & Managing Director at onlinemortgageadvisor.co.uk
Small businesses employ around 60% of the UK workforce, so rising insolvencies risk feeding directly into higher unemployment and more fiscal strain for the government. Workforce jobs have already fallen by about 180,000 this year, and vacancies are down to 728,000. The labour market is weakening, and unless this trend is reversed, it spells growing trouble for Labour.
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Daniel Wiltshire
Actuary & IFA at Wiltshire Wealth
The numbers are worrying, but reports on the ground are even worse. Business owners say conditions are the toughest in memory. Construction firms - an economic bellwether - paint a particularly gloomy picture. We may already be in recession, the statistics just haven’t caught up yet.
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Harry Mills
Director at Oku Markets
Rising insolvencies is a function of the deliberately oppressive and challenging environment cultivated by this Labour government. Things will get tougher, with a heavy, and set to rise, tax burden.
Copy

Clive Bonny
MD at Strategic Management Partners
My home town Brighton now has more failures than startups. The loss of small enterprise grants has reduced access to professional advisors like myself for business continuity planning, risk management and IP protection. Startups and micro firms need this support. Just £1,000 can identify and plug critical risks. These grants should be channelled via regional Chambers of Commerce who have well established business networks and qualified advisors. Local councils were given £2.5billion for SME support three years ago but sadly much was wasted in managing funds with too few audits. UK Government, please use regional Chamber resources already in place to give our four million small enterprises and out of work entrepreneurs the chance to survive and scale up
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Paul Harrison
Co-founder at The Travel Franchise
Today's data showing a 16% year-on-year increase in individual insolvencies and 6% rise in company failures reflects the ongoing pressures facing UK businesses.

The contrast with franchising statistics is notable. The British Franchise Association's 2024 survey indicates the franchise sector recorded a forced churn rate of less than 2%, compared to the widely cited statistic that approximately 50% of independent businesses fail within their first five years.

This disparity reflects the advantages of the franchise model - established operational systems, brand recognition, and ongoing support networks.

The franchise sector's contribution to the UK economy stands at £19.1 billion, suggesting these business models have demonstrated resilience during recent economic uncertainty.