For the first time since Companies House began publishing statistics in 2012, the UK’s official company register contracted at the end of 2024. This is a stark indicator of the mounting pressures facing British businesses. By December, there were 5,408,707 companies listed, down 19,879 from the previous quarter. More tellingly, the statistics excluding firms already in dissolution or liquidation shrank by nearly 60,000.

While part of this decline is due to Companies House’s new powers to strike off non-compliant firms, the sharp rise in dissolutions tells a deeper story about the growing wave of insolvencies. In Q4 2024 alone, more than 203,000 businesses were dissolved. This was roughly a 25% increase year-on-year. At the same time, new company registrations slumped by 15.5% to 181,261.

Economic pressures are at the heart of this trend. Rising inflation, tax hikes from the Autumn Budget, and increased employer National Insurance contributions have all driven up operational costs. From April, businesses will also face higher minimum wage burdens, compounding the strain. This mix of cost pressures has been a key reason behind the accelerating closures.

Additionally, administrative demands are deterring new incorporations. The trend for setting up businesses has changed, as many entrepreneurs are now choosing to operate as sole traders. This helps them avoid the mounting compliance burden of incorporation and save business costs.

What this means for distressed business buyers

The tightening of Companies House rules and rising compliance costs are making it harder for smaller, owner-managed businesses to survive. The April Budget could introduce further changes (e.g., business rates reform, VAT adjustments), which might tip already struggling sectors into insolvency, particularly bricks-and-mortar businesses. This signals more acquisition opportunities for those interested in business turnarounds. 

With rising operational costs pushing many companies to the brink, sellers may be more open to negotiation. Buyers may be able to acquire strong brands, customer bases, or assets from companies that are otherwise unable to continue trading at lower prices and under more favorable terms than in a buoyant market

As regulatory scrutiny and higher compliance demands deter some would-be entrepreneurs, there may be fewer competitors bidding on distressed assets. This environment could be better poised for negotiations. Whether seeking whole businesses or cherry-picking valuable assets, this is also a good time to consolidate fragmented industries. 

This trend represents a rich landscape for strategic buyers, but one that requires careful navigation. For the right buyer, it’s a chance to take a leading position when others are pulling back.