Around 28,000 British businesses face going bust this year

Business insolvency rates will remain 30 per cent above pre-pandemic levels next year after with another 27,650 firms set to go bust in 2025, research suggests.

Official data last week that showed another 2,000 UK firms went under last month as a sharp rise in labour costs, stubbornly high inflation and weak consumer confidence have contributed to monthly company insolvency rates at 30-year highs since 2023.

Forecasts published by Allianz Trade on Tuesday suggest annual UK insolvency rates in 2025 will be broadly flat on 12-year highs seen last year and remain 20 per cent above pre-Covid levels into 2027.

Maxime Darmet, senior economist at Allianz Trade, said: 'Higher costs, wages and taxes dragging on business' resources are the major driver of these insolvencies.'

It follows a sharp rise in labour costs for British businesses, largely driven by Labour's employer national insurance contribution hikes earlier in the year.

Darmet said: 'Cutting NICs for employers would be impactful, with lower contributions strengthening business competitiveness. However, the recent increase in employer NICs runs counter to this objective.'

Allianz Trade also said higher insolvency rates are 'evidence of firms' difficulties to overcome the succession of shocks and challenges since Brexit'.

It points to 'prolonged increases' in insolvency rates across manufacturing, wholesale and agriculture, as well as 'prolonged high levels despite decreases' in hospitality, transport, real estate, information and communications, and construction.

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The trade credit insurance specialist said it expects insolvency rates to remain high next year, with rates set to fall by just 3 and 5 per cent in 2026 and 2027, respectively.

But Britain is doing better than other countries

However, the report also revealed the UK is 'still faring better than many of its global counterparts'.

Allianz Trade, expects global business insolvencies should rise to rise by 6 per cent this year and 5 per cent next year, before falling 1 per cent in 2027 in 2026, before declining in 2027 (-1%).

It warned the impact of global trade tariffs on insolvencies 'could be delayed to 2026, with a heightened risk of domino effects'.

Western European countries are expected to see insolvency rates rise 6 on average this year, with France, Switzerland and Germany seeing rates soar 35, 26 and 11 per cent, respectively.

In the US, insolvency rates are set to rise by 9 per cent this year and 8 per cent in 2026, before falling 1 per cent in 2027.