The number of companies entering compulsory liquidation in the UK has surged to its highest level in over a decade. The total number of firms that were forced to shut down in February crossed 350. In total, 393 businesses closed across England and Wales. This marks the highest monthly figure since September 2014, reflecting worsening financial distress among businesses struggling to stay afloat. 

Compulsory liquidations occur when a court orders a company to shut down due to its inability to pay outstanding debts. This often leaves creditors with significant losses.

Despite this spike, the total number of business closures fell 7% year-on-year and reached the figure of 2,035. However, most of these closures were voluntary rather than the result of financial collapse. The latest insolvency data shows 1,520 creditors’ voluntary liquidations, 115 administrations, and seven company voluntary arrangements, indicating that financial strain remains widespread. 

The outlook for businesses is set to become even more challenging in April, as tax increases and higher minimum wage requirements come into effect. These additional costs will put further pressure on already struggling firms, particularly those with tight margins and high operating expenses. The construction sector remains the worst affected, accounting for 17% of all insolvencies. Many firms in this industry continue to battle expensive debt and supply chain disruptions, making it increasingly difficult to remain solvent.

Adding to the strain, borrowing costs remain high, with the Bank of England expected to maintain interest rates at 4.5% in its upcoming monetary policy meeting. This prolonged period of elevated rates has limited access to affordable credit. It also makes it harder for businesses to manage cash flow and invest in growth. With economic pressures mounting, analysts warn that the UK could see even more business collapses in the coming months. It will be particularly hard for industries already experiencing significant financial headwinds.

Despite the challenges, it’s important to note that in such a situation, the market is favourable for those who are looking to turnaround struggling businesses. With April’s tax and wage increases looming, further insolvencies are likely.

Key Opportunities to Look Out For

• Asset Acquisitions at Liquidation Prices: Manufacturing firms may offer discounted machinery and equipment, while retailers could offload inventory at a fraction of market value. Office-based businesses may provide valuable intellectual property, trademarks, and customer databases.
• Strategic Market Expansion: Buyers can acquire failing competitors in construction (which accounted for 17% of February’s insolvencies), hospitality, or retail to increase market share. For example, a construction firm could absorb a struggling rival’s ongoing contracts, workforce, and supply agreements.
• Supply Chain Control: Companies reliant on third party suppliers can purchase distressed suppliers to secure production lines, reduce procurement costs, and protect against future disruptions.

Buyers who act swiftly, conduct thorough due diligence, and implement strong turnaround strategies can gain valuable footholds in their industries at a fraction of the usual cost.