Company insolvencies rose sharply in England and Wales in March, as firms faced mounting pressures just before being hit by higher employment costs and the looming impact of new global trade tariffs.
According to fresh data from the Insolvency Service, 1,992 companies collapsed last month — a 2% drop from February, but a 9% rise compared to March 2024. The figures highlight a growing strain on businesses in the run-up to significant economic challenges, including a rise in company national insurance contributions introduced by Labour in April.
Creditors’ voluntary liquidations (CVLs) continued to dominate, accounting for 1,543 of the insolvencies. This represents an 8% year-on-year rise, as more company directors opted to close their businesses proactively rather than face enforced closure. Meanwhile, compulsory liquidations — where companies are wound up by court order — rose by 5%. Administrations, typically involving larger firms seeking restructuring or sale, jumped by a notable 30%.
March’s insolvency statistics offer a snapshot of the commercial landscape just before external pressures intensified. Firms have since faced higher employment costs and, on the global stage, fresh turmoil following former US President Donald Trump’s re-imposition of sweeping import tariffs.
In the weeks since March, business sentiment has worsened. Surveys suggest confidence and output across the UK’s private sector have dropped significantly, as firms come to terms with a more hostile trading environment and inflationary pressures.
Jennifer Lockhart, a partner at law firm Brabners, commented: “An increase in insolvency levels makes for sobering reading, even despite recent unexpected growth in the UK economy. These figures represent the relative calm before the Trump administration’s tariffs were unleashed on global trade – causing significant uncertainty for those operating in export-heavy industries such as manufacturing.”
Adding to the gloom, the International Monetary Fund (IMF) earlier this week slashed its global growth forecast by 0.5 percentage points, warning that nearly all economies would suffer. The UK’s own economic growth forecast for 2025 was cut to 1.1%, down 0.5 percentage points from the IMF’s previous estimate. Weaker consumption, rising bills, and surging energy prices were cited alongside the fallout from tariffs as key drivers behind the downgrade.
Lockhart warned that businesses with strong export ties — particularly in sectors like manufacturing and automotive — are now particularly vulnerable to supply chain disruptions and reduced overseas demand.
David Hudson, a consultant at the restructuring advisory firm FRP, painted a similarly bleak picture. “Insolvency numbers are likely to remain elevated for the foreseeable future with weaker appetite from would-be investors a key factor,” he said.
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“In the past, distressed companies might have been able to avoid collapse by securing fresh capital, selling to a competitor, or finding a consolidator willing to invest. But in today’s market, stagnation has drastically reduced the likelihood of a white knight arriving. Investors are increasingly discerning about where they put their money, as elevated costs, weak demand, and geopolitical volatility in areas like tariffs all dampen their appetite for risk.”
With inflation still stubbornly high and borrowing costs weighing heavily on businesses, many analysts expect insolvencies to climb further over the course of 2025. Sectors already grappling with thin margins — such as retail, hospitality, and construction — are likely to remain particularly exposed.
Meanwhile, pressure is mounting on the Government to deliver measures that could shield smaller businesses from the worst of the economic storm, including potential tax reliefs or incentives to stimulate investment and consumer spending.
As Britain’s firms brace for more challenging months ahead, the latest insolvency figures serve as a stark reminder of how fragile the post-pandemic recovery remains — and how swiftly new global and domestic pressures can derail it.
