Louise Brittain, Joint Head of Restructuring & Insolvency at international accountancy and business advisory group Azets, says:

“Numbers for all three of the main corporate insolvency processes increased in January compared to December, but the largest monthly increase came in Administrations, which reached their highest level since June 2024.”

“Corporate insolvencies continue to be driven by a combination of director fatigue, economic and political issues and increased creditor aggression. Firms have been trading through tough times since the Pandemic, and many directors are running out of options, ideas and energy after five years of firefighting.

“At the same time, creditors are increasingly taking action to resolve unpaid debts – led by HMRC who appear to be taking a more robust attitude to those who owe tax money than they did during the pandemic and immediate aftermath, and private sector creditors are following their lead in an attempt to lighten their own cost pressures.

“Communication is key in scenarios like this – simply not paying bills or taxes and ignoring communication from people you owe money to isn’t constructive and will make a tough situation worse.

“More broadly, it’s a case of new year, same problems as rising costs – notably purchasing, staff and energy – continue to erode margins and shrink profits, while the uncertainty that characterises the national and global political and economic climate is making it harder to take strategic business decisions and secure funding for rescue or expansion.

“Consumers continue to watch their spending carefully and with basic lifestyle costs continuing to escalate, higher earners are now being more affected by cost-of-living issues, which will have consequences for another tier of businesses, as well as those who are already feeling the pinch of a financially cautious customer base.

“The Golden Quarter lost its shine for many businesses this year. While retail sales rose in January, the retail and hospitality industries didn’t have the December pre-Christmas boost many were hoping for, and this will have been a blow for firms in these industries right across the UK – one which many couldn’t recover from – as people stay in or spend online, and wage and employment costs rise throughout this sector.

“Looking at other areas of the economy, construction continues to struggle amidst project delays, shrinking margins and payment issues, while we’re hearing there are a number of overleveraged real estate companies who are becoming nervous as planning permission and project starts are postponed.

“While some industries are more prone to higher levels of insolvency, no business is safe from reduced demand or from financial distress. It’s highly likely there will be more pain to come for directors and an increasing demand for insolvency advice and support this year, and the firms that stand the best chance of survival are those whose management teams spot and act on the signs of financial distress as early as possible.

“If you’re seeing payment days lengthen, your stock pile up, or are becoming concerned about paying staff or taxes, that’s the time to speak to an advisor. It’s a very hard conversation to have, but having it when your worries are starting to appear gives you a better chance of improving your situation, a better likelihood of turning around your business, and more potential solutions to the issues you’re facing than if you’d waited until the issues became more severe and the problem more serious.”

Azets has Hampshire offices in Southampton (Chandler’s Ford), Portsmouth and Havant.

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