R3 responds to January 2025 insolvency statistics

18 February 2025

• Corporate insolvencies increased by 6.4% in January 2025 to a total of 1,971 compared to December 2024's total of 1,852, and increased by 10.7% compared to January 2024's figure of 1,780.
• Corporate insolvencies increased by 13.1% from January 2023's total of 1,743.
• Personal insolvencies decreased by 3.4% in January 2025 to a total of 9,706 compared to December 2024's total of 10,045, and increased by 11.6% compared to January 2024's figure of 8,698.
• Personal insolvencies increased by 12.5% from January 2023's total of 8,630.

Tim Cooper, President of R3, the UK’s insolvency and restructuring trade body, and a Partner at Addleshaw Goddard LLP, says: 

“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.

“When it comes to personal insolvencies, while overall numbers are higher than they were a year ago, the increase is down to a higher number of people entering a Debt Relief Order (DRO) – and is likely to be a result of the changes in debt threshold and the removal of the administration fee that were introduced last year. Breathing Space numbers are at their highest since this time last year, and this – coupled with the figures for personal insolvencies that have been published today – shows that the debt problem faced by households in England and Wales continues to be a serious one.

“There’s no getting away from the fact that years of rising prices have hit household finances hard, and as we reach the final stages of a long, cold winter, financial concerns remain a constant worry for many. At a time of year where heating and food costs are continuing to rise, people are keeping a close eye on their outgoings and a wary one on their bank accounts as they worry about the future of the economy and their own finances.

“We urge anyone who is worried about money to seek advice as soon as possible. Discussing your finances – whether personal or business – is incredibly hard, but having the conversation when your worries are new gives you more time to decide how you move forward and potentially more options than if you’d waited until the problem became more severe. Most R3 members will give prospective clients a free consultation so they can understand more about the issues they are facing and outline the potential options for resolving them.”