R3 in Yorkshire responds to August 2025 insolvency statistics

Dave Broadbent, chair of the UK’s insolvency and restructuring trade body R3 in Yorkshire and partner at Begbies Traynor in York and Teesside, says:

“Corporate insolvencies have decreased slightly in August 2025 when compared to the previous month, but have increased almost 6% when compared to the same month last year. The trend shows continued high numbers of formal insolvencies, although some way off the peaks of 2023 when pandemic-era problems unwound.

“For many businesses, uncertainty in what is already a difficult trading environment remains the dominant theme. The now confirmed November Budget is already casting a long shadow, with widespread speculation about possible changes to business taxation, such as the bank surcharge and business rates. Until the details are known, it is harder for directors and investors to make investment, recruitment and expansion decisions. This hesitancy has wider economic consequences for growth and productivity, as indicated by the latest disappointing GDP figures for July.

“The well documented problems businesses face because of higher costs caused by inflationary pressures are also beginning to come to the fore once again. Higher costs for energy, materials are once again eroding margins. Businesses cannot always pass these increases onto consumers, many of whom are themselves reducing discretionary spending.

“Interest rate expectations are a further constraint. While businesses had hoped for meaningful reductions in the cost of borrowing this year, the expectation now is that rates will remain at their current level for some time, in part because of inflationary concerns. This keeps the cost of servicing debt higher and makes new borrowing for investment harder to justify.

“Sector-specific pressures are also evident. Construction is struggling, with housebuilding slowing and smaller contractors reporting quieter pipelines. This is a sector that tends to feel changes in economic conditions quickly, and many firms lack the reserves to withstand long gaps between projects. Retail and hospitality also continue to face difficulties, with high staff costs, subdued consumer confidence and no major summer events to boost spending. A further update on transforming business rates is expected in the November Budget but for struggling retail and hospitality businesses meaningful change is needed quickly.

“The labour market is beginning to reflect this uncertainty. Unemployment continues to edge up while vacancies have fallen, and high-profile industrial disputes contribute to a general sense of unease.

“Employers are often leaving posts unfilled or reducing hours but we are not thankfully seeing large scale redundancy. In some cases, businesses are investing in technology, and utilising AI and automation to ease cost pressures. This shift may increase productivity and help balance the books, but it creates the perception of a cooling jobs market.

“On the personal insolvency front, there has been a marked increase in Debt Relief Orders and Individual Voluntary Arrangements. This trend suggests a worrying jump in financial distress among both those who are worse off and those with more substantial incomes. This has been accompanied by a significant 12% month-on-month decline in breathing space registrations; however, the number is still up by 2% compared to this month last year.

“Debt Relief Orders (DRO) provide a vital option for those in the worst situation with very limited assets and income, and their rising numbers reflect the reality that more households are unable to meet basic costs. The cumulative effect of rising utility bills, housing costs and continuing food price inflation has left many families struggling to make ends meet. For these people, DROs can offer a much-needed mechanism to resolve unsustainable debts.

“Overall, the August data is likely to underline a sense of “stable stress”: insolvency activity remains high but not volatile, reflecting an economy marked by caution, cost pressures and policy uncertainty. Businesses and households alike are holding back, waiting for clarity on future conditions. Unless greater stability emerges – through clearer policy direction, lower borrowing costs or easing inflation – insolvency levels are unlikely to fall back to pre-pandemic norms in the near term.

“Our message to businesses and individuals remains the same: seek advice from a regulated professional at the first signs of financial distress. Taking action early gives you more options and more time to make a considered decision about how to best move forward in your circumstances.”