PERSONAL INSOLVENCIES SURGE WHILE BUSINESS FAILURES HOLD STEADY
Corporate insolvencies fell slightly in August but remain significantly higher than a year ago, while personal insolvencies continued to climb, according to the UK’s insolvency and restructuring trade body R3.
Figures published for August 2025 show corporate insolvencies down 1.7% month-on-month at 2,048, but up 5.9% on the same period in 2024. Compared to August 2023, the figure represents a 9.6% decline. Personal insolvencies told a different story, rising 6.8% from July to 11,348 cases, a 16.1% increase on August 2024 and 32.5% higher than two years ago.
Tom Russell, President of R3 and Director at James Cowper Kreston, said the latest numbers underscore the pressures facing both businesses and households. “Corporate insolvencies have decreased slightly in August 2025 when compared to the previous month, but have increased almost 6% when compared to the same month last year. The trend shows continued high numbers of formal insolvencies, although some way off the peaks of 2023 when pandemic-era problems unwound.”
Russell pointed to ongoing uncertainty ahead of November’s Budget, with speculation around changes to business taxation – including the bank surcharge and business rates – creating hesitancy among directors and investors. “Until the details are known, it is harder for directors and investors to make investment, recruitment and expansion decisions. This hesitancy has wider economic consequences for growth and productivity, as indicated by the latest disappointing GDP figures for July.”
Inflationary pressures are also beginning to resurface. “Higher costs for energy and materials are once again eroding margins. Businesses cannot always pass these increases onto consumers, many of whom are themselves reducing discretionary spending,” Russell said.
He warned that interest rate expectations remain a further constraint. With reductions in borrowing costs now unlikely, servicing existing debt is proving challenging, while new investment is harder to justify. Sector-specific issues are compounding the strain, particularly in construction, retail and hospitality. Smaller contractors are reporting weaker pipelines, while consumer-facing businesses face high staff costs and subdued demand.
The labour market, Russell noted, is reflecting this uncertainty. “Unemployment continues to edge up while vacancies have fallen, and high-profile industrial disputes contribute to a general sense of unease. Employers are often leaving posts unfilled or reducing hours but we are not thankfully seeing large-scale redundancy. In some cases, businesses are investing in technology, and utilising AI and automation to ease cost pressures.”
Personal insolvencies are increasingly being driven by rising numbers of Debt Relief Orders (DROs) and Individual Voluntary Arrangements (IVAs). DROs, aimed at those with the least ability to pay, now highlight how many households are unable to meet basic living costs. Although “breathing space” registrations fell 12% month-on-month, they remain higher year-on-year.
“The cumulative effect of rising has left many families struggling to make ends meet. For these people, DROs can offer a much-needed mechanism to resolve unsustainable debts,” Russell explained.
He concluded that the UK economy is experiencing a period of “stable stress”: insolvency activity remains elevated but not volatile. “Businesses and households alike are holding back, waiting for clarity on future conditions. Unless greater stability emerges – through clearer policy direction, lower borrowing costs or easing inflation – insolvency levels are unlikely to fall back to pre-pandemic norms in the near term.”
Russell urged early intervention for those at risk. “Our message to businesses and individuals remains the same: seek advice from a regulated professional at the first signs of financial distress. Taking action early gives you more options and more time to make a considered decision about how to best move forward in your circumstances.”
