The latest government statistics reveal a 5% reduction in registered company insolvencies across the UK, with a total of 23,872 cases in 2024 compared to the previous year.

Data from The Insolvency Service also highlights a 6% month-on-month decline in company insolvencies for December and a 14% decrease compared to December 2023. However, experts caution that this apparent improvement may not signal long-term stability.

Stephen Goderski, Partner at PKF Littlejohn Advisory, described the decline in insolvencies as a positive development but warned of impending business pressures. “A reduction in insolvencies is encouraging, but the real challenge is what lies ahead. With national insurance contributions set to rise in April, businesses will see their payroll costs increase, putting further strain on cash flow at a time when many are already stretched,” he said.

Goderski noted that larger businesses and small and medium-sized enterprises (SMEs) remain particularly vulnerable in the current economic environment. “Although some relief is coming, businesses are still waiting for clear signs of sustainable growth and improved trading conditions. If uncertainty lingers, there is still a risk that insolvencies could rise again in the months ahead,” he added. He emphasised the importance of early action, including seeking professional advice and reassessing financial strategies, to improve long-term viability, particularly for SMEs.

Giuseppe Parla, Business Recovery Partner at Menzies, echoed these concerns, pointing out that December’s figures may not reflect broader trends. “2024 was a year of financial uncertainty, with two separate Governments searching for the golden ticket to achieve economic growth. The result, however, was reduced business confidence, a high bank base rate, and an enhanced tax burden for businesses,” he explained.

Parla highlighted the impact of increased employer national insurance contributions on hiring and retention costs, which could exacerbate financial difficulties for many companies. Furthermore, he pointed to changes in business asset disposal relief (BADR) and capital gains tax (CGT) as factors reducing asset values and increasing tax liabilities, leaving businesses with fewer resources to weather economic challenges.

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Despite these challenges, Parla noted that reduced market competition could offer opportunities for well-positioned companies. “Where there is uncertainty, or a lack of stability in the economy, this provides companies with strong foundations an opportunity to grow, as those with shorter foresight begin to fall. As ever, our message would be for businesses to act early if they anticipate financial trouble. Doing so ensures that more options are available for securing a profitable future and remaining trading,” he said.

While the decline in insolvencies is welcome, the outlook remains uncertain as businesses prepare for higher payroll costs and navigate a complex economic landscape. Proactive measures and strategic planning will be essential to ensuring resilience in the months ahead.

Theo Chatha, Chief Financial Officer at Bibby Financial Services, said: “While insolvency rates dipped slightly in 2024, the numbers remain alarmingly high compared to the previous decade, underscoring continued challenges for small businesses across the UK going into 2025.

"Insolvencies don’t happen in isolation - they can trigger a vicious cycle in supply chains, with unpaid invoices causing bad debt and strained cashflow. Our Q3 2024 SME Confidence Tracker found that 58% of SMEs surveyed had at least one supplier go bust, and almost two-thirds experienced customers ceasing to trade last year.

“Yet bad debt is a hidden assassin which is often overlooked, slipping under the radar of many SMEs. Throughout 2025, businesses should take proactive steps to protect themselves: assessing exposure to unpaid invoices, recovering outstanding payments swiftly, and strengthening supply chains to mitigate potential risks.”