The start of a new year is usually a moment for optimism. For those working in restructuring and insolvency, however, 2026 begins with a clear-eyed recognition that the pressures facing UK businesses are no longer temporary.
As 2025 came to a close, it became evident that the past year was not about a sudden wave of failures, but about the delayed consequences of a long period of economic strain finally working through company balance sheets. Higher interest rates, persistent cost inflation and muted growth have combined to leave many businesses operating with little margin for error and that reality is now shaping decision-making across the market.
What 2025 Told Us
From an insolvency and restructuring perspective, several trends defined the year:
- Insolvency levels remained stubbornly high.
Throughout 2025, corporate insolvencies consistently exceeded long-run averages. In the year to September 2025, approximately one in every 189 UK companies entered a formal insolvency process a rate materially above pre-pandemic norms and well in excess of historical baselines. - Distress remained concentrated in key sectors.
Construction and wholesale/retail continued to account for a disproportionate share of insolvency activity. Thin margins, extended payment terms and constrained access to working capital left many mid-market businesses structurally exposed, particularly where projects overran or demand softened. - Creditor enforcement activity increased.
Enforcement accelerated during the year, driven not only by HMRC’s expanded use of winding-up petitions, but also by a broader shift among lenders and trade creditors toward crystallising losses where covenants were breached or recovery prospects deteriorated. - Directors sought advice earlier and more frequently.
There was a noticeable rise in boards seeking formal restructuring advice, independent business reviews and duty-of-care guidance. Directors are increasingly aware that governance failures and delayed action carry heightened personal and regulatory risk.
Taken together, these trends point to sustained pressure in the UK mid-market rather than a cyclical dip. Many directors describe the current environment as one of constant adjustment, with cost bases, regulation and stakeholder expectations changing at a pace at least comparable to past downturns.
What Changes in 2026
Several important developments will shape the year ahead:
- More Accessible Restructuring Tools
Revised practice statements for Schemes of Arrangement and Restructuring Plans (effective January 2026) streamline evidence requirements, improved judicial oversight and reduce cost and timing uncertainty. For mid-market companies, this makes formal restructuring a more realistic option where consensual solutions have proved difficult. - A Sharper Enforcement Focus
The Insolvency Service’s 2025–26 programme places significant emphasis on system modernisation and enforcement. Increased digital capability is paired with a clear policy shift toward proactive investigation and deterrence. - Heightened Director Accountability
Budget 2025 measures taking effect in 2026 expand HMRC’s enforcement powers and widen the circumstances in which directors can be disqualified. Governance, compliance and documentation standards will be scrutinised more closely in distressed situations. - Rising Professional and Process Standards
Updated ethical standards for insolvency practitioners and further digitisation of insolvency procedures signal a more efficient but also more transparent operating environment.
Key Themes Shaping Restructuring in 2026
Looking ahead, three forces are likely to dominate:
- Deeper, sector-specific distress, particularly in retail, leisure, construction and real estate, where refinancing and margin pressures persist.
- A shift in asset profiles, with increasing focus on intangible value such as data, contracts and digital platforms, requiring more specialist valuation and restructuring approaches.
- The growing use of AI and analytics, enabling earlier identification of distress and more robust scenario planning and raising expectations around the quality of decision-making.
Will Insolvencies Rise in 2026?
In short: yes but not evenly across the economy.
Rather than a sharp, economy-wide spike, we expect:
- Sustained, elevated insolvency levels,
- Increased use of both formal and informal restructuring tools, and
- Greater demand for early-stage advisory support, well before insolvency becomes unavoidable.
This is a period of structural adjustment, not a passing cycle. Distressed situations are becoming more complex, more sector-specific and less forgiving of delay making early, informed intervention the defining factor in outcomes.
