March 2026 commentary:

Insolvencies rose this month to 2,022, an increase of 7% from February, but similar to March 2025 levels.

April marks the introduction of a range of tax changes that will affect all of us in the 2026/27 tax year. While some of these increases may appear modest at first glance, their true impact is likely to be felt over a period of time because of fiscal drag.

Giuseppe Parla, Restructuring and Insolvency Director at Menzies LLP, says the fall in insolvencies offers little comfort as a deepening geopolitical crisis and rising tax burden combine to push more businesses toward financial difficulty.

“The geopolitical backdrop remains one of the most significant threats to UK business stability. Ongoing tensions in the Middle East continue to drive up energy and fuel costs, disrupt supply chains, and keep inflation stubbornly above the Bank of England’s 2% target. The UK economy is expected to be among the most exposed in the developed world – and much of this impact is yet to filter through to company balance sheets or be reflected in insolvency data.

Compounding this, the new tax year has brought a fresh wave of cost pressures. While there have been no headline rate rises, frozen thresholds, reduced reliefs and tighter allowances are quietly intensifying ‘fiscal drag’ – steadily increasing the tax burden on both businesses and consumers. Together, these twin pressures continue to squeeze margins and suppress demand, and risk driving more businesses into the red.

A fall in insolvency numbers this month should not be mistaken for the all-clear. We are likely still climbing the mountain rather than descending from its peak. With cost pressures still building, consumer demand under strain, and uncertainty persisting, this month’s figures may prove to be a brief plateau rather than a sustained decline – and insolvency numbers could yet rise further in the months ahead.”

Company insolvencies increased 7% in February 2026, compared to January 2026 – but sit 7% lower than in February a year prior. In effect, this correlates to one in 194 companies on the Companies House register.

In terms of the top impacted sectors, perhaps unsurprisingly they remain unchanged:

Top sectors include:

Construction (3,912, 17% of cases with industry captured),

Wholesale and retail trade; repair of motor vehicles and motorcycles (3,661, 16% of cases with industry captured),

Accommodation and food service activities (3,305, 14% of cases with industry captured),

Administrative and support service activities (2,417, 10% of cases with industry captured), and

Professional, scientific and technical activities (1,974, 8% of cases with industry captured).

Manufacturing (1,895, 8% of cases with industry captured).

Giuseppe Parla, Restructuring and Insolvency Director at Menzies LLP, says the increase highlights the fragile position many UK businesses remain in, as new economic pressures begin to build:

“While corporate insolvencies rose in February, the figures underline the ongoing strain many British businesses continue to face following a prolonged period of elevated costs and high interest rates. The data reflects conditions at the time, when there were tentative signs that inflation was moving closer to the Bank of England’s 2% target and expectations were building that interest rates could begin to fall later in the year.

However, the economic backdrop has shifted considerably since the end of the month. Escalating conflict in the Middle East has pushed global oil prices higher and raised concerns about disruption to key shipping routes such as the Strait of Hormuz. This has increased the likelihood of renewed inflationary pressure, particularly as higher energy and transport costs begin to filter through supply chains.

Many businesses had hoped the Spring Statement would provide meaningful support, but for large parts of the business community the measures announced offered little relief. For companies already operating on tight margins, rising costs and ongoing uncertainty could quickly translate into further financial distress. As a result, we could see insolvency numbers continue to rise in the months ahead.

As ever, our message to businesses is clear: act early if you anticipate financial trouble. Doing so ensures that more options remain available to address challenges, protect value and secure a sustainable future for the business.”

Freddy Khalastchi, Restructuring & Insolvency Partner at Menzies LLP, warns that the pressures facing high street and leisure operators are now increasingly structural, rather than simply seasonal:

“Hospitality, retail and leisure businesses had hoped for a stronger start to the year, yet many continue to grapple with rising costs, subdued consumer spending and increasingly limited headroom within already thin operating margins.

Hospitality, leisure, property and construction businesses tend to feel the strain most acutely at this time of year, as winter weather and shorter daylight hours dampen activity and delay projects. Retailers, meanwhile, are often forced into heavy discounting to clear unsold Christmas stock, as fragile demand and persistent cost inflation further erode profitability.

The latest insolvency figures underline that these challenges extend well beyond a typical post-Christmas slowdown. Instead, they point to deeper pressures that continue to test the resilience of the UK’s consumer-facing sectors and may require urgent policy attention.”

Khalastchi adds that while the recently announced pub rescue package offers some targeted relief, broader support remains limited:

“Aside from limited relief for pubs – many of which have already closed their doors in recent years – there has been little meaningful government support for other struggling sectors. With food, drink and raw material costs still rising, the full impact of the increase in Employer’s National Insurance now being felt. This, coupled with another uplift in the National Minimum Wage, due within months, means that preserving working capital has now become critical.

For many businesses, survival will depend on holding their nerve until the spring, when expected interest rate cuts may help revive consumer spending and ease financial pressures. Those that act early and seek professional advice will retain the widest range of options – and the best chance of navigating what remains a highly challenging trading landscape.”