Insolvency levels hit highest level in eight months in Awful April
April insolvency levels soared to their highest level in in eight months, official data has shown, reflecting businesses’ helplessness in the face of higher employment costs and the looming threat of President Trump’s tariffs.
Over 2,000 companies collapsed last month, with most owners filing for voluntary liquidation and some 105 firms going into administration.
If figures are seasonally adjusted, the number of compulsory liquidations in April was the highest monthly total in more than ten years, according to the government’s Insolvency Service.
The latest data shows that one in 190 companies on the Companies House effective register entered insolvency over a one-year period, which is slight decrease on the year ending April 2024.
Analysts at the UK’s insolvency and restructuring trade body R3 said high costs were damaging businesses’ confidence, with the relatively low survival rate of UK firms compared to pre-pandemic levels showing how small and medium-sized businesses have not been offered enough support.
Chancellor Reeves’ £20bn tax raid on employers’ national insurance contributions (NICs) and decision to raise the national living wage are testing companies around the country, R3 president Tom Russell suggested.
“It is unlikely that we will see the full impact [these costs] will have on businesses until later in the year, but the prospect of these changes being introduced has influenced a number of directors’ decisions to seek insolvency and restructuring advice and consider the future of their businesses,” he said.
“The recent increase in unemployment indicates that the tax increases, along with the prospect of the Employment Rights Bill coming into law, has also affected hiring levels and investment as management teams wait to see how it will affect their wage bills, and we expect this to continue until the picture is clearer.”
Construction is top of insolvency leaderboard
The construction sector, which is crucial to the government’s target of building around 1.5m homes in five years, accounted for 17 per cent of all cases captured for insolvencies in the 12 months to March 2025.
City AM analysis revealed earlier this month that construction business insolvencies had increased to their highest ever level.
Insolvency rates have rapidly increased due to the collapse of the likes of ISG, one of the UK’s biggest contractors, industry sources suggested.
R3’s Russell said construction firms faced difficult months ahead due to the lack of work being commissioned while the care sector would have to adapt quickly after the government set out a range of policies aimed at reducing the number of migrants entering the UK on low wages.
“There is no escaping the fact that all of these sectors will be seriously affected by the changes to national insurance and Minimum Wage, which will put a further squeeze on margins and increase costs, and could lead to more businesses becoming financially distressed,” Russell added.