While most of us are glad to see the back of Dry January and darkness at 4pm, there is a very good reason to look back to the first month of 2025 this week – the publication of the latest corporate insolvency figures by The Insolvency Service.
And just like your first visit to the gym after a festive break, they come with a shock.
The total number of company insolvencies in England and Wales in January 2025 was 1,971
This was up 6% on last month’s total of 1,852 and 11% higher than the total a year ago.
This is also the first time in three years that the total for January is higher than the preceding month and is the highest January monthly total since 2009.
Analysis
Of the 1,971 corporate insolvencies recorded in January, the most frequent type were Creditors’ Voluntary Liquidations (CVLs) with 1,546.
This is a 9% increase on the previous month’s total and is 14% higher than the same period 12 months ago.
CVLs make up 78% of all corporate insolvencies recorded in January, an increase of 1% from the ratio in December. CVLs had been increasing at a rate of approximately 10% between 2017 and 2019 before the pandemic and additional measures brought in by the government to protect businesses arrested their growth.
There were a total of 269 compulsory liquidations recorded in January. This was a decrease of 5% from the previous month and also a 5% reduction on the same period a year ago.
As more directors take the initiative and control of the insolvency process themselves by getting advice and acting on it if their business is in difficulty, there will always be some who wait for matters to be taken out of their hands.
HMRC will continue to crack down on companies with corporation tax, VAT, PAYE and National Insurance (NICs) arrears with more resources being allocated to them and more staff being recruited.
We should also see the continued use of statutory demands and winding up petitions which will also keep the number of compulsory liquidations relatively high.
There were 142 administrations in January which was a 10% increase on the previous month’s total and a 9% increase on the number recorded in January 2024. Administrations have now recovered to their pre-pandemic levels after falling to 18-year-lows during the Covid affected year.
14 Company Voluntary Arrangements (CVAs) were recorded in January which was a monthly decrease of 18% and was down 13% on the same period from a year ago.
CVAs had fallen to their lowest levels since 1993 but have recovered to about half of their pre-Covid totals.
Many directors consider CVAs and administration processes because of the additional options and legal protections they bring that enable them to reduce their outstanding debts and restructure their businesses and finances rather than go straight into a liquidation process to close their companies.
There was one moratorium registered in January 2025 but no receivership appointments or restructuring plans registered in January 2025.
Since June 2020 50 companies have obtained an insolvency moratorium to pause legal actions from creditors while they are financially restructured while a further 26 companies had their restructuring plans registered at Companies House as required under the Corporate Insolvency and Governance Act 2020.
According to the monthly rolling data from the Companies House register one in 190 companies (at a rate of 57.1 per 10,000) entered insolvency between 1 February 2024 and 31 January 2025. This was a slight increase from the previous rolling 12 monthly total.
The Insolvency Service produces these 12-month rolling rates calculated as a proportion of the total number of active companies which they say highlights longer term trends and is designed to “tune out” any one-off or monthly volatility – although both the monthly and rolling numbers have increased.
Scotland
In Scotland last month there were 75 company insolvencies, a decrease of 15% on the total from a year ago.
January’s total was made up of 32 compulsory liquidations (up from 27); 37 CVLs (down from 52) and six administrations (up from three). There were no CVAs or receivership appointments recorded.
Scotland’s insolvency regime is partly devolved. The Accountant in Bankruptcy (AiB), Scotland’s insolvency service, administers the Register of Insolvencies which is a publicly accessible statutory register regarding the insolvency of individuals and businesses in Scotland including company liquidations and receiverships.
Between June 26th 2020 and January 31st 2025, there were three restructuring plans and one moratorium in Scotland. Both of these procedures were created by the Corporate Insolvency and Governance Act 2020.
Traditionally Scotland has seen more compulsory liquidations than any other kind of insolvency process but CVLs overtook them in April 2020 and have remained higher ever since.
This shows that more Scottish directors and their accountants are taking difficult decisions early but this enables them to retain control of key elements of the process rather than relying on creditors taking action and forcing the closure of their businesses.
The 12 month rolling insolvency rate for the effective register shows a rate of 51.3 companies per 10,000 entering insolvency in Scotland between February 1st 2024 and January 31st 2025. This was a decrease of 1.3 from the preceding 12 months ending in January 2024.
Northern Ireland
In January there were 28 company insolvencies in Northern Ireland. This was five more than last month but 7% lower than the total from January 2024. .
The total number of company insolvencies was comprised of 15 compulsory liquidations (up from four); ten CVLs (down from 17) and three administrations (up from one). There were no CVAs (down from one) or receivership appointments made last month.
There was one moratorium recorded in Northern Ireland between June 26th 2020 and January 31st 2024 and no restructuring plans.
The total insolvency rate in the 12 months up to and including January 2025 in Northern Ireland was 35.6 per 10,000 companies on the effective register. This was an increase of 4.3 from the 12 months to January 2024.
The total number of company insolvencies for the whole of the UK in January was 2,074 – a monthly increase of 131.
Tim Cooper, President of R3, the UK’s insolvency and restructuring trade body said: “The monthly and yearly rise in corporate insolvencies is down to an increase in the number of CVLs and administrations.
“That would suggest that directors may be choosing to close down their firms after years of challenging trading conditions and ahead of the increase in the National Minimum Wage and Employers National Insurance Contributions (NICs) in April, and this has pushed corporate insolvency levels to the highest we’ve seen in January in more than five years.
However, there is some positive news in the form of the increase in administration numbers – to a figure that’s higher than this time last month and this time last year – as it suggests that there are more companies that have the potential to be rescued via a sale out of administration.
“Creditor pressures and ongoing cost issues are continuing to drive corporate insolvencies. A long period of rising expenses coupled with consumers’ reluctance to spend is continuing to take a toll on businesses, and creditors have now largely abandoned the benign attitude they had in the aftermath of the pandemic as they attempt to manage their own debts.
“We’ve also seen HMRC return to its pre-pandemic approach of pursuing money it’s owed after years of taking a more supportive stance during and after the Covid-era.
“On top of this, firms across a number of sectors haven’t had the results from the Golden Quarter they were hoping for. Retailers have seen an increase in sales but this has largely been driven by discounts and deals, and the construction sector has been affected by the weather, client caution around commissioning projects and ongoing rises in costs.
“The hospitality sector has also failed to see the rise in revenues it was hoping for at Christmas although pubs and bars had a better start to the year than expected after many adapted their offerings to accommodate Dry January.
“Looking at the wider economy, the projected cut in growth has had an impact on business confidence and led to many directors and management teams becoming unsure about investment or business growth this year, as well as reducing firms’ willingness to invest in growing their workforces ahead of cost increases in April. However this has also led to the Bank of England cutting the base rate of interest which should improve access to rescue finance.
“Against this backdrop, I would expect to see an increase in demand for restructuring advice and support, as firms consider their options ahead of the end of the financial year and with cost and creditor pressures unlikely to ease in the short-term.”
Statistics for some months can be outliers and don’t suggest a general direction of travel for the year. But sometimes they do and if the first monthly rise in corporate insolvencies in January for four years is a harbinger of what’s to come then this could turn out to be as tough a year as business owners will be dreading.
But why wait to find out?
You can get in touch with us right now to arrange a free initial consultation to discuss what options you have available depending on your unique circumstances that you can begin to implement straight away.
No matter what your aims and objectives are for 2025, the sooner you get some impartial, practical advice and ideas, the sooner you can act on them to protect and strengthen your business.