The UK restructuring and insolvency sector is constantly shifting, presenting businesses with fresh challenges and opportunities. As we look to 2025, several key trends are emerging, shaping the future of insolvency practices and corporate restructuring. Understanding these shifts is essential for both businesses and advisors to avoid potential disruptions. This blog will explore the top 10 predictions for UK restructuring and insolvency in 2025.
1. Increased corporate insolvencies post-pandemic
The economic impacts of the COVID-19 pandemic are still being felt across the UK, particularly as government support measures phase out. By 2025, the business environment will likely be recovering from these extended periods of uncertainty. While many businesses have adapted to new conditions, those struggling financially may face increased pressure as loans become due, and other challenges arise. The likelihood of more corporate insolvencies is high as businesses adjust to a new economic reality.
2. The rise of pre-pack administration
Pre-pack administration allows struggling companies to sell their business and assets quickly, often to save jobs and preserve value. This option is expected to gain prominence in 2025 as companies seek more efficient ways to restructure and reduce debt while avoiding lengthy court proceedings. As corporate insolvencies rise, we predict that pre-pack administrations will become an increasingly attractive option for directors and creditors alike.
3. A surge in personal insolvencies
As the cost-of-living crisis continues to impact households and businesses, personal insolvencies are set to rise. Many individuals, particularly those in self-employment or small business ownership, may struggle with overwhelming debts. In 2025, the UK’s insolvency sector will face a growing challenge, with more debt relief orders and IVAs expected.
4. Focus on Environmental, Social, and Governance (ESG) compliance
With ESG considerations becoming a central part of business strategy, UK businesses will be expected to adopt more sustainable practices for reputational reasons and long-term financial viability. In 2025, we predict that companies with poor ESG compliance will be more vulnerable to insolvency, as creditors and investors increasingly factor in sustainability when making decisions. ESG considerations will likely become part of the insolvency process, with liquidators assessing whether failure to meet certain criteria played a role in a company’s decline.
5. Continued impact of Brexit on business viability
The aftermath of Brexit continues to unfold, and UK businesses are facing new barriers to trade, especially in the context of supply chains and export restrictions. By 2025, we expect businesses to still be adjusting to the full impact of Brexit. This may contribute to insolvencies, particularly among businesses heavily reliant on EU markets. Restructuring plans and insolvency proceedings must account for these unique challenges as companies adapt to new trading relationships.
6. Increased regulatory scrutiny
In response to growing public and political scrutiny, the government is expected to continue tightening regulations surrounding insolvency practices. This may include more stringent rules regarding directors’ responsibilities, particularly in wrongful trading cases, and greater transparency in insolvency proceedings. As regulatory bodies ramp up oversight, we foresee businesses and insolvency practitioners having to adapt to a more complex and accountable environment in 2025.
7. Digital transformation of insolvency processes
Technology is already transforming the restructuring and insolvency landscape, and this trend is set to accelerate in 2025. Digital tools that streamline insolvency processes, such as cloud-based management systems, artificial intelligence (AI) in forecasting financial distress, and automated reporting mechanisms, will become more widespread. Insolvency practitioners will increasingly rely on these tools to improve efficiency, reduce costs, and enhance the experience for both creditors and debtors.
8. Greater use of Company Voluntary Arrangements (CVAs)
Company Voluntary Arrangements (CVAs) will likely continue to be a popular tool for distressed businesses looking to avoid liquidation and continue trading. With the increasing complexity of financial difficulties, the use of CVAs is expected to grow in 2025. This mechanism allows businesses to propose a compromise to creditors while still being able to operate. The flexibility offered by CVAs will be crucial for many businesses trying to recover from financial challenges, including the ability to rework debts and restructure.
9. The impact of rising interest rates
As inflationary pressures continue to affect the UK economy, interest rates are predicted to rise. Higher borrowing costs could put pressure on businesses, particularly those with large debts. The burden of servicing loans at higher rates could drive many companies into financial distress, leading to an increase in insolvencies and restructurings. Companies that have relied on cheap financing will need to adapt quickly or face more severe financial trouble in 2025.
10. Cross-border insolvencies on the rise
As the UK continues to navigate its post-Brexit position in the global economy, cross-border insolvencies are expected to rise in 2025. International business operations and partnerships will become more complicated, and UK businesses with global operations may find themselves involved in insolvency proceedings that span multiple jurisdictions. Insolvency professionals must adopt more sophisticated strategies and collaborate across borders to achieve a seamless process.
Navigating Change
The UK restructuring and insolvency environment in 2025 is set to be dynamic, shaped by various macroeconomic and regulatory factors impacting how businesses manage financial challenges. With the rise of pre-pack administrations and the increasing focus on ESG compliance, companies will face a more complex environment. Businesses must stay ahead of emerging trends and work with experienced restructuring professionals to manage these changes and succeed, enhancing their prospects for recovery and long-term growth.
Ask an expert
If your business faces financial challenges, acting early and seeking professional advice is essential. We can help you deal with these difficulties and find the best path forward. Call us on 0800 246 1845 or email us at mail@leading.uk.com to discuss your options and find the right solution for your business.
