Compulsory liquidations at highest levels for over a decade

While it was good to see the end of February and the official start of Spring, it’s not just the odd frosty morning that will bring a chill to directors and business owners when they look through this breakdown of the latest corporate insolvency figures by The Insolvency Service. 

The total number of company insolvencies for England and Wales in February 2025 was 2,035.

This was up 3% on last month’s total of 1,978 but 7% lower than the monthly total from a year ago. 

This is also the second consecutive month of growing insolvencies.

Analysis

Of the 2,035 corporate insolvencies recorded in February, the most frequent type were Creditors’ Voluntary Liquidations (CVLs) with 1,520. 

This is a 2% reduction on the previous month’s total and is 13% lower than the same period 12 months ago.

CVLs make up 75% of all corporate insolvencies recorded in February, a decrease of 3% from the ratio in January. CVLs have 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 in their growth.

There were a total of 393 compulsory liquidations recorded in February. This was an increase of 41% from the previous month and a 49% increase on the same period from a year ago. 

This was the highest monthly total of compulsory liquidations seen since September 2014. 

In 2024 as a whole, compulsory liquidations were at their highest levels since 2014 having increased annually by 14%. This sees an increase from the record low levels seen in 2020 and 2021 while restrictions applied to the use of statutory demands and winding-up petitions (leading to compulsory liquidations). 

HMRC are continuing 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 to investigate and take action. 

This will see the continued use of statutory demands and winding up petitions which will continue to keep the number of compulsory liquidations high.

There were 115 administrations in February which was an 18% reduction on January’s total and a 27% reduction from the same month a year ago. Despite these falls, administrations have now recovered to their pre-pandemic levels after falling to 18-year-lows during the Covid affected year of 2020.

Seven Company Voluntary Arrangements (CVAs) were recorded in February which was a 50% reduction in last month’s total and a 42% fall from February 2024. 

This was the lowest monthly total of CVAs recorded since October 2022. CVAs have recovered to approximately half of their pre-Covid levels but there is still headroom to expand further. 

Directors tend to look at CVAs and administrations for several reasons including the additional options and legal protections they bring that enable them to not only reduce their outstanding debts but to restructure their businesses and finances rather than look to skip straight to a liquidation process that would close their companies.

There were no receivership appointments, moratoriums or restructuring plans registered with the courts in February 2025.

Since June 2020, 50 companies have obtained an insolvency moratorium to successfully pause legal actions from their creditors while they financially restructure 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 taken from the Companies House register, one in 191 companies (at a rate of 57.6 per 10,000) entered insolvency between 1 March 2024 and 28 February 2025. This was a slight decrease 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.

Scotland

In Scotland last month there were 103 company insolvencies, a 10% increase on the total from a year ago and 28 more than a month previously. 

February’s total was made up of 38 compulsory liquidations (up from 32); 60 CVLs (up from 37) and five administrations (down from six). There were no CVAs or receiverships 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 February 28th 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 51.6 companies per 10,000 companies on the effective register. This was down by 1.2 from the preceding 12 months ending February 2024.

Northern Ireland

In February there were 21 company insolvencies in Northern Ireland. This was seven fewer than a month ago and 19% lower than the same period a year ago. 

The total number of company insolvencies was comprised of nine compulsory liquidations (down from 15); eight CVLs (down from ten); two CVAs (up from zero) and two administrations (down from three). There were no receivership appointments made last month. 

There was one moratorium recorded in Northern Ireland between June 26th 2020 and February 28th 2025 and no restructuring plans.

The total insolvency rate in the 12 months to February 2025 in Northern Ireland was 35.1 per 10,000 companies on the effective register. This is an increase of 2.5 from the 12 months to February 2024 and the second consecutive monthly increase. 

The total number of company insolvencies for the whole of the UK in February 2025 was 2,159 – a monthly increase of 85.

The impact of the rise in outgoings becomes apparent

Tom Russell, Vice President of R3, the UK’s insolvency and restructuring trade body said: “The monthly increase in corporate insolvencies is driven by a rise in compulsory liquidations, which are at their highest level in more than five years, while the year-on-year reduction is due to a fall in CVLs and administrations. 

“Compulsory liquidations are often initiated by HMRC or local authorities as a measure of last resort and the increase indicates a toughening of the position towards debts owed by companies to the public sector and the ongoing efforts of the government to help balance their books.

“A number of economic and political issues are continuing to drive insolvencies and affect businesses across the supply chain. 

“High costs and cautious consumer and client spending and mean creditors are being made aggressive about pursuing the money they’re owed and aren’t afraid to turn to the courts to recover outstanding debts, while a large proportion of directors of insolvent businesses feel closure is the only option open to them after years of trading through tough conditions and with little hope of these improving in the short-term.

“With firms facing further increases in expenses when National Insurance and National Minimum Wage rises are introduced in April, enquiries for restructuring and insolvency support are increasing as directors look to take specialist advice about their business finances and we expect this to continue for the next few months as the impact of the rise in outgoings becomes apparent. 

“This is a particular issue for small businesses as they can find it difficult to pass on extra costs to customers while remaining competitive and many businesses of this size will inevitably be considering making savings through, for example, reduced investment or reductions in staff levels. 

“From a sectoral perspective, retail and hospitality firms are continuing to suffer as consumers continue to cut back their discretionary spending, while construction output has been affected by a fall in new work and poor weather, and manufacturing has continued to be affected by cost and trade issues which have hit demand and output levels. 

“All of these sectors have had to contend with continuing increases in costs alongside these challenges and are likely to be among those most affected by the NI changes being introduced.”

We wondered if last month’s first monthly rise in January company insolvency statistics was an outlier and with February’s total being even more and compulsory liquidations rising to their highest level in over a decade, this might turn out to be as tough a year as business owners will fear it could be. 

With a tough government Spring Statement coming next week, now is the perfect time to find out what options you have to protect your business from the storms ahead. 

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.