The latest GDP figures from the Office for National Statistics paint a bleak picture for the UK economy. With output unexpectedly shrinking by 0.1% in January 2025, recessionary pressures persist. This contraction, driven by falling manufacturing, construction, and weak services growth, comes at a critical time, as the Chancellor’s Spring Statement is less than two weeks away. 

Despite modest growth of 0.2% over the preceding three months, overall momentum remains fragile. Businesses are bracing for rising costs from April, including higher National Insurance contributions and minimum wage increases. These are further expected to dampen hiring and investment. Moreover, as the government’s planned welfare cuts and focus lies on defence spending, fiscal pressures could mount higher. 

It is likely that the coming months will see persistent weak growth, combined with global uncertainty and new trade tensions. This is also likely to fuel rising insolvency levels as companies struggle to cope with tighter margins and falling demand. This challenging economic backdrop sets the stage for a difficult year ahead for UK businesses.

Distress in UK Manufacturing – Overview

UK manufacturing production fell sharply by 1.1% month-on-month in January 2025. Right after the 0.7% growth seen in December, it actually fell well below market expectations as experts had predicted little to no change in January. 9 out of 13 manufacturing sub-sectors showed lower outputs at the beginning of the year. The uncertainty around global trade and  renewed supply chain disruptions have escalated these challenges. Rising tensions with key trading partners has further hampered export-driven manufacturing industries.

The most significant contractions were seen in basic metals and metal products (-3.3%), other manufacturing and repair (-3.3%), and pharmaceuticals (-3.3%). There were also steep declines in coke and refined petroleum products (-10.8%) and wood, paper, and printing products (-3.2%). This underscores the sector’s ongoing contraction amid broader economic headwinds.

Things to Look Out For

As margins are squeezed and demand falters, many manufacturers particularly those in hard-hit sub-sectors may face insolvency. This also means that they will seek to offload assets to stay afloat. For distressed business buyers, this creates a window to acquire high-value assets such as specialised machinery, production facilities, and intellectual property. Buyers should also keep a close watch on businesses that are in early stage distress. 

There is also scope to purchase customer contracts and supplier agreements, which can offer immediate market entry or expansion opportunities. Entire businesses with established workforces and regulatory approvals may be available at significantly reduced valuations, providing buyers with ready-made operations. Additionally, acquiring companies in sectors like basic metals or wood and paper products, both seeing output decline, could allow buyers to consolidate market share. Opportunities might also spring up to vertically integrate supply chains, or diversify into new product lines while competitors are under pressure.

The Impact of Successful Distressed Acquisitions: A Case Study on Colson Caster 

Introduction

Colson Castors is a UK-based manufacturer of castors and wheels, supplying sectors such as medical, automotive, and industrial. Known for its high-quality components, the company has a long-standing presence in the metal products and industrial components manufacturing sector.

Problem

Colson Castors (UK) Ltd was placed into administration in 2020. It was subsequently acquired by Colson Group Holdings BV, a Netherlands-based entity within the broader Colson Group. The reasons for the administration were as follows:

• Declining demand: Many products used in industrial application faced reduced orders, linked to broader slowdowns in the industrial and manufacturing sectors.

• Rising costs: Raw materials Increased costs of raw materials and production squeezed margins particularly during Brexit and the early impacts of COVID-19.

• Cash flow and debt issues: The combination of reduced revenue and rising costs led to severe cash flow problems, making it difficult to meet ongoing liabilities.

Solution

The strategic cross-border acquisition by Colson Group Holdings BV (Netherlands) not only provided immediate financial relief but also enabled a partial continuation of manufacturing operations within the UK.

Overall impact

By retaining key assets and parts of the workforce, the deal preserved valuable industrial capacity and local jobs, while allowing Colson Group to restructure the business under new ownership. The transaction demonstrated how international buyers can leverage distressed opportunities to secure footholds in the UK manufacturing sector, particularly in niche industrial components. The rescue package also safeguarded relationships with suppliers and customers, ensuring a degree of business continuity despite the insolvency event.

Insolvency News | Atlas Leisure Homes Enters Administration

East Yorkshire caravan manufacturer, Atlas Leisure Homes, has entered administration. The company had been facing severe financial challenges for the last few months. FRP Advisory now manages the company. This administration has resulted in the immediate layoff of 180 employees. The Hull-based firm, a stalwart in the industry for nearly 50 years, succumbed to a post-pandemic market downturn coupled with soaring operational costs.

Despite a robust £68.8 million turnover in its latest financial year, the company’s pre-tax profit dwindled to a mere £69,000, signaling deep financial distress. Once thriving during the staycation boom, Atlas saw its order books shrink while expenses skyrocketed. Two previous restructuring efforts and attempts to secure new funding proved futile.

The administrators are now assisting affected employees with redundancy claims. A crew has been appointed to facilitate an orderly wind-down. Mark Hodgett, partner at FRP, attributed the collapse to a saturated market and rising costs. The insolvency practitioners have also stated that the business could not continue without further investment. The closure marks the end of a long-standing local employer and a significant blow to the region’s manufacturing sector.

Insolvency News | UK Steel Manufacturing Firm Faces Financial Crisis

The Australian government’s administration of the Whyalla steelworks has severely disrupted Sanjeev Gupta’s efforts to salvage his British operations. This has added to the list of challenges within the already vulnerable UK manufacturing sector. Gupta’s Liberty Speciality Steel, GFG’s UK arm, which supplies critical sectors like aerospace and defense, relies on pre-payments from two customers, a fragile arrangement ending in May. Without a court-sanctioned restructuring by May 24th, liquidation looms. 

 Gupta, facing billions in global debt, had aimed for a creditor deal by late March, but the unexpected move has destabilised his GFG Alliance.  With Whyalla’s administration restricting GFG’s liquidity, Gupta’s barrister admitted their global settlement is now unviable. 

GFG, grappling with £289 million in UK debts linked to Greensill Capital’s collapse, faces intense creditor negotiations. While a new deal is sought, it is important to note the company’s already precarious financial state, which reflects broader anxieties within the UK’s industrial base. The situation highlights the interconnectedness of global supply chains and the vulnerability of UK manufacturing to international financial shocks.