
As the UK economy grapples with persistent challenges, insolvency rates are climbing, with businesses across key sectors feeling the strain. High interest rates, elevated borrowing costs, and ongoing geopolitical uncertainties have created a volatile environment where financial distress is becoming increasingly common.
Recent research reveals that corporate distress levels, while showing some signs of stabilising at the end of 2025, remain significantly above historical averages. Sectors such as real estate, retail, and infrastructure are bearing the brunt, with limited refinancing options and declining investment metrics compounding the pressure. Despite some stability in valuations, profitability and liquidity continue to suffer, with insolvencies expected to rise further in 2025.
How can businesses navigate this economic uncertainty?
The reduced availability of credit and tighter refinancing options further escalate liquidity challenges, particularly for highly leveraged sectors like real estate and retail. To navigate these challenges, businesses must adopt proactive strategies at the beginning of the year, including:
Cash Flow Management: Implement robust cash flow forecasting to anticipate shortfalls and maintain sufficient liquidity buffers.
Debt Restructuring: Engage with creditors early to negotiate repayment terms, explore refinancing options, or secure waivers.
Cost Optimisation: Streamline operations by reducing non-essential expenditures and improving operational efficiency to preserve profitability.
Diversification: Reduce reliance on vulnerable revenue streams by exploring alternative markets, products, or services.
Scenario Planning: Develop contingency plans to address potential market shocks, such as further interest rate hikes or supply chain disruptions.
Professional Guidance: Seek advice from insolvency practitioners or restructuring experts to explore options such as company voluntary arrangements (CVAs) or pre-pack administrations, which can provide a pathway to recovery while preserving operations.
While these measures can mitigate immediate risks, long-term resilience requires adapting to evolving market dynamics. This includes leveraging technology, embracing sustainable practices, and staying attuned to changes in consumer behavior and regulatory landscapes.
Impact on Unemployment
Our exclusive Annual Report on Insolvency Trends is set to release next week, highlighting significant trends and challenges faced by the UK economy in 2024. We’ve also covered the impact of financial distress on unemployment rates, and the figures are worrisome.
More than 145,000 jobs were lost due to major brand closures, over 8,000 high-street branches vanished, and 441 banks and 115 Post Offices shut down, leaving many without vital access to services. The brewing industry also faced turmoil, with over 900 jobs lost or at risk due to brewery closures. Beyond retail, the hospitality, construction, and sports sectors also appear prominently on the list, underscoring the widespread impact of financial distress.
Measures from the government’s Autumn Budget, including increases in National Insurance contributions and the National Minimum Wage, have unsettled businesses already grappling with the fallout from the pandemic, the cost-of-living crisis, and the ongoing economic impact of geopolitical tensions like Russia’s invasion of Ukraine.
Small-to-medium-sized enterprises (SMEs) face the brunt of these difficulties, as they lack the financial flexibility larger corporations often rely on to weather economic storms. For many SMEs, a single external threat could mean closure, emphasizing the precarious position of smaller businesses in this challenging environment.
Insolvency News | Financial Distress on the Rise in the North East
North East businesses faced a tough 2024, struggling under the weight of nearly two million overdue invoices. Research states that the number of unpaid bills in the region rose by 3.4% compared to the previous year, reaching a total of 1,872,510 overdue invoices. October proved to be particularly challenging, recording 171,028 overdue invoices—the highest monthly total of the year.
The number of businesses impacted also grew, with 150,126 North East firms reporting overdue invoices, a 1.8% increase from 2023. While declining inflation offered some relief by slowing the rise in operating costs, other challenges outweighed these gains.
Persistent supply chain disruptions hindered business operations, high energy costs continued to erode profit margins, and political uncertainty surrounding the election created an unpredictable environment. New pressures introduced in the October budget further compounded these difficulties, leaving many businesses unable to meet payment deadlines.
Among UK regions, the North East recorded the sixth-largest increase in firms struggling with overdue payments, trailing Scotland, Greater London, and the North West. These figures underscore the challenging conditions that continue to test the resilience of the region’s businesses.
In Yorkshire and the Humber, insolvency-related activities—such as liquidator and administrator appointments and creditors’ meetings—rose by 5%, increasing from 220 cases in November to 231 in December. This uptick reflects the ongoing pressures faced by businesses in the region, particularly as broader economic challenges persist.
Simultaneously, business start-ups in the area continued to decline sharply. Following a 16% drop in November, the number of new start-ups fell by the same percentage again in December, reducing the total to just 3,235. This sustained downturn underscores the region’s challenging business climate, with fewer entrepreneurs taking the leap into new ventures.
Nationally, insolvency-related activities climbed in December across most UK regions, with notable increases of 60% in the North East and 25% in Greater London. These figures highlight the mounting financial strain across the country. However, not all regions followed this trend. Scotland experienced a 32% decline in insolvency-related activity, while South East England saw a modest 4% reduction. These regional variations illustrate the uneven impact of economic pressures on businesses nationwide.
Insolvency News | Pre-pack Administration Deal for Pizza Hut
Directional Capital has acquired Pizza Hut’s UK dine-in restaurants through a pre-pack administration process, ensuring the continuation of 139 restaurants and safeguarding approximately 3,000 jobs.
The acquisition follows the administration of Heart With Smart Restaurants, which operated the Pizza Hut franchise in the UK. Upon being appointed as joint administrators, Will Wright and Chris Pole of Interpath immediately finalized the sale of the business and its assets to DC London Pie, a subsidiary of Directional Capital.
Directional Capital, a US-based private equity firm with existing Pizza Hut operations in Sweden and Denmark, has now expanded its European portfolio with this deal. This acquisition strengthens the company’s food and beverage platform, which spans over 240 locations across Europe and the UK.
Previously owned by Pizza Hut UK’s management team, led by CEO Jens Hofma and backed by investor Pricoa, the group faced mounting financial pressure due to tax hikes announced in the autumn budget. To counter these challenges, Heart With Smart had been actively seeking buyers since November. The company was also among 220 hospitality businesses that collectively appealed to the government, warning of the potential impact of increased National Insurance Contributions on jobs and operations.
This strategic acquisition provides Directional Capital with a robust platform to further develop its European operations while securing the future of a well-established UK restaurant chain.
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