UK business distress persists despite fewer insolvencies, report finds

Corporate distress across the UK has shown little movement over the past year, according to the Institute for Turnaround’s latest Societal Impact report, which found that pressure on companies remains broadly unchanged after a 10% rise recorded in 2024.

The sixth annual report, which was published today (19 November), points to inflationary pressures, management fatigue and political uncertainty as key factors weighing on firms as they enter 2026. Members also highlighted the need for businesses to adapt their operating models as market conditions shift.

Although insolvencies have eased compared with 2023 and 2024, levels remain above those recorded in 2021 and 2022. The institute said distress was rising in almost every region, with Wales posting the sharpest increase at 10% between the second quarters of 2024 and 2025. London reported a 9% rise, while the North East and Yorkshire saw smaller increases of 3% and 1%.

Real estate and energy have seen the biggest percentage increases in distress between 2024-25, posting growth of 22% and 20% respectively. However, in terms of hard numbers IFT members still see retail, construction, and professional services as the sectors with the largest numbers of distressed businesses, which have consistently been the top three in recent years.

Despite these conditions, members reported improved outcomes in 2025. Independent specialists generated an estimated £2.8bn in shareholder value, secured £2bn of new funding for restructuring work and helped safeguard 59,562 jobs. Nearly two-thirds of members expect to be busier in the months ahead, and more than three-quarters anticipate stronger demand for turnaround support in 2026.

Members identified governance and organisational change as the most common focus of recent assignments, with three-quarters of projects requiring work in this area. Changing organisational structures featured in 72% of cases. Short-term survival measures such as cost reductions and cashflow forecasting were also common, each cited by 73% of respondents. Strategic change remained the most frequent priority over the past year, highlighted by 75% of members.

However, cultural and psychological barriers continue to deter companies from seeking help early. Almost four-fifths of members said reluctance within leadership teams was a major obstacle, while others pointed to limited awareness of turnaround options and a tendency for issues to remain unnoticed until late in the process.

Milly Camley, chief executive of the IFT, said: “This report really shines a light on the positive and transformative effect that our members’ work has on business, individually and collectively.

“As economic waters remain choppy, punctuated by socioeconomic uncertainty, fluctuating prices and wafer-thin margins, turnaround professionals across the country are working tirelessly to ensure companies not only overcome their problems, but can build on them too.”

Claire Burden, chair of the IFT, added: “If there’s a key takeaway for businesses reading the report, it is the opportunity for businesses to work with expertise to manage their way through challenges and build resilience. This is particularly important at the smaller end and supports the growth and competitiveness of UK plc.”