More than 270 businesses became insolvent in February, up from 222 in January, although the figures are flat compared to the same month in 2025.
High taxes faced by operators combined with a dip in consumer confidence have been blamed for the rise in insolvencies, with the conflict in the Middle East likely to create further problems for businesses.
“Hospitality insolvencies are back on the rise, which is unsurprising given the burdensome tax regime faced by operators combined with subdued consumer demand, making it increasingly challenging to stay afloat.
“While bigger operators tend to be better insulated due to having stronger balance sheets and economies of scale to fall back on, it’s the smaller, independent businesses that are struggling the most,” says Saxon Moseley, partner and head of leisure and hospitality at leading audit, tax and consulting firm RSM UK.
“Unfortunately, the outlook for the sector isn’t much rosier. The jump in insolvencies came even before the Middle East conflict, which if it continues, could hit consumer sentiment and discretionary incomes, combined with an expected rise in inflation and energy costs, resulting in a double whammy for the hospitality industry. Operators are already having to contend with the Employment Rights Act, and rise in National Minimum Wage and business rates, meaning some have, and others will, decide it’s no longer viable to keep their doors open.”
Hospitality ‘sector under most strain’
The stats are the first real annual indicator of the insolvency rates in the UK given the typically soft January as creditor action drops off at year-end, according to Vernon Dennis, partner and head of business advisory at Howard Kennedy, who says that voluntary liquidations are on the rise as boards become more proactive in closing businesses, especially amid market turmoil.
Hospitality and retail remain the sectors under the most strain, as weak consumer confidence, regulatory pressures, and new employer obligations squeeze margin, he says.
“[The] rise in insolvencies suggests a return to underlying trends following January’s typically ‘soft’ figures, which are distorted by timing, seasonality and behavioural factors which mitigate against creditors taking action at a year end. What we’re seeing in the February figures is a continuation of the rising numbers of companies entering liquidation, as creditors once again show more willingness to clamp down on debtors,” he says.
“This trend is not new. Enforcement activity from HMRC has been rising since 2024, while voluntary liquidations are also increasing as boards take proactive decisions to close businesses amid market instability and weak consumer confidence. It is noteworthy that despite the rise in liquidation numbers, the February numbers are still below the average monthly totals for 2025. This below average trend may however be imperilled as economic growth is currently at 0% and inflationary pressures promoted by oil and gas price rises cause recessionary fears.
“Administrations, CVAs and restructuring plan numbers remain flat, largely due to the lack of meaningful rescue finance. Businesses across most sectors are facing tighter margins – particularly in hospitality – while traditional bank funding remains constrained. Although private credit has increasingly filled the gap, recent instability in that market may make lenders more cautious and limit the capital available to distressed companies.”
Gordon Thomson, restructuring partner at RSM UK, adds: “Relatively weak sales in the hospitality industry along with relentless cost pressures have required some operators to explore restructuring options to optimise their trading position and to reduce their cost base.
“It’s encouraging to see businesses taking action rather than burying their heads in the sand, but this highlights just how challenging it is to operate in the current environment. As pressures in the sector intensify in the coming months, we expect to see more operators having to consider restructuring options in order to survive.”
“Hospitality remains the sector under the greatest strain, especially across F&B and hotels, where weak consumer confidence, regulatory pressures and new employer obligations are squeezing margins. Retail, while more robust than hospitality, continues to face similar challenges. Meanwhile, the construction and development sectors remain areas of concern as projects struggle to maintain momentum without access to rescue funding.
“But we can still hold out hope. Shocks from geopolitical and economic events are usually reflected in the insolvency figures several months after. So, if we see an early resolution to ongoing conflict, it may paint a very different picture of the insolvency landscape for the year ahead.”