UK Insolvency Outlook for 2026: What Practitioners Are Seeing on the Ground

As the UK insolvency market heads into 2026, we talked to professionals working across advisory mandates, formal appointments, and asset realisations about what they are seeing in practice. Their responses point to sustained cost pressures, cautious capital, and a widening gap between consensual workouts and swift enforcement.

Pre-Insolvency Engagement Grows, Without Reducing Formal Filings

Across professional practices, pre-insolvency advisory work continues to rise, though often as a precursor rather than an alternative to formal appointments. Louise Brittain, partner and head of restructuring and insolvency at Azets and incoming president of the IPA, said advisory work accounted for roughly 10% to 15% of her team’s fee income in 2025. “There are more enquiries about advisory work,” she said, “but when looking in more detail the position was more dire than expected and so formal appointments quickly followed.” Brittain added that recent appointments have tended to be larger and more complex, reflecting how quickly liquidity issues can crystallise once confidence is lost.

From a broader market perspective, Tom Russell, president of R3 and director at James Cowper Kreston, said feedback from R3 members indicates that directors are seeking advice earlier amid uncertainty, even if that does not always avert insolvency. Russell also highlighted a notable rise in solvent liquidations during 2025, driven in part by business owners accelerating exit decisions ahead of anticipated tax changes. “Although some of the muted changes didn’t materialise in the budget, the uncertainty itself was enough to prompt action,” he said.

Distress Broadens Into Growth and IP-Led Sectors

While retail, hospitality, and construction remain the most heavily affected sectors, several professionals stressed that 2025 exposed meaningful distress in areas still perceived as growth-led. Alexander Muir of Hilco said businesses in medical technology, software, renewables, and artificial intelligence have increasingly struggled to secure follow-on funding despite holding strong intellectual property. “Strong underlying IP has increasingly proved insufficient to secure further funding amid lower investor risk appetite,” Muir said, noting that investors are now far less tolerant of long development cycles and pre-profit business models.

Muir added that many of these SMEs borrowed to fund growth or R&D on the assumption that refinancing would remain straightforward. As interest rates rose and capital tightened, those assumptions fell away, forcing otherwise viable businesses into restructuring or insolvency earlier than anticipated. This has shifted recovery strategies toward asset-level outcomes. “Stakeholders are increasingly focused on identifying, isolating and monetising the elements of the business that still carry standalone value,” he said, particularly patents, software, and data.

Will Wright, UK CEO at Interpath, said pressure in retail, leisure, and hospitality is likely to intensify as higher operating costs intersect with tighter household budgets. “We do expect to see an uptick in restructuring activity,” Wright said, characterising the shift as a move toward earlier intervention rather than a wave of collapses. Businesses that succeed, he said, will be those that act early, reassess underperforming assets, and focus relentlessly on cash.

Creditor Behaviour Becomes More Polarised

On creditor dynamics, practitioners described a market increasingly defined by divergence rather than consensus. Stephen Jacobs of Christie & Co said mainstream lenders have largely continued to show forbearance, extending repayment holidays or facilities to allow borrowers time to refinance or sell assets. By contrast, alternative and tertiary lenders have been quicker to enforce security. “We witnessed a lesser degree of forbearance from alternative lenders, who were quicker to appoint administrators or receivers to enforce and sell assets,” Jacobs said.

Jacobs also reported a clear increase in assignments linked to HMRC winding-up petitions, particularly in cases involving operational real estate such as care homes. He described scenarios where administrators were appointed between petition issuance and hearing, or where liquidators were tasked with selling businesses trading to preserve value. “The objective in many cases was to buy time to secure a sale,” he said.

Russell confirmed that HMRC has adopted a more assertive enforcement posture, supported by Insolvency Service statistics and reinforced by recent fiscal measures. While acknowledging the public interest in robust tax collection, he warned that the approach adds pressure to already strained cashflows. Brittain said her firm has not yet seen a significant rise in HMRC petitions but expects enforcement to accelerate. “We know this is coming,” she said.

Brittain also highlighted an unexpected increase in urgent appointments driven by fraud-related issues, but said creditors are otherwise generally engaging in more complex workouts provided there is enough headroom and time to do so.

Restructuring Plans Remain a Large-Cap Tool

There was broad consensus that restructuring plans remain largely inaccessible for SMEs. Richard Hawkins of Atlantic RMS said the cost and professional time required will continue to restrict their use to larger companies.

Brittain described restructuring plans as increasingly complex and lawyer driven, while Russell pointed to ongoing appellate uncertainty around cross-class cram-down as a further deterrent. “That complexity inevitably increases time and cost,” Russell said, adding that consensual tools such as CVAs will remain more practical for most SMEs absent greater judicial clarity.

Outlook: Adjustment Rather Than Collapse

Looking ahead to 2026, contributors identified a familiar but potent mix of pressures. Hawkins cited an anti-business policy environment and persistent geopolitical uncertainty, including conflicts in Ukraine and the Middle East, as continuing drags on confidence. Russell pointed to weak consumer confidence as the single biggest macroeconomic constraint, warning that rising unemployment could further suppress investment.

Taken together, the outlook for the UK insolvency market in 2026 points to continued strain rather than systemic shock. Distress is becoming more diffuse, while creditor behaviour is increasingly selective and polarised. Advisory engagement is rising, but often only briefly ahead of formal action, and sophisticated restructuring tools remain out of reach for most SMEs. Against that backdrop, practitioners broadly agree that early engagement, realistic capital structures, and a sharper focus on asset-level value will be critical as businesses navigate another year shaped by high costs, cautious capital, and fragile confidence.