Number of people becoming financially insolvent reached 15-year high in 2025

The number of people becoming financially insolvent across England and Wales jumped to a 15-year high last year, according to Insolvency Service figures.

The number taking out debt relief orders (DROs) was at its highest since the introduction of this type of insolvency in 2009, with 46,939 recorded in 2025.

The Insolvency Service said that a total of 126,240 personal insolvencies were recorded last year.

This was 7% higher than in 2024 and the highest number since 2010 when 134,971 cases were recorded during the aftermath of the financial crisis.

With the adult population of England and Wales having grown over time, the proportion of adults entering insolvency was higher in 2019 than it was in 2025, according to the Insolvency Service’s figures.

The total number of personal insolvencies is made up of individual voluntary arrangements (IVAs) and bankruptcies, as well as DROs.

Increases in the number of people taking out DROs followed the removal of a £90 admin fee from April 2024, and the expansion of eligibility criteria in June 2024.

The number of IVAs in 2025 was higher than in 2024 but lower than record numbers recorded between 2019 and 2022, the Insolvency Service said. Some 71,841 IVAs were recorded last year, which was 7% higher than 2024.

Bankruptcy numbers were slightly lower than in 2024 and remained less than half of pre-2020 levels. Some 7,460 bankruptcies were recorded in 2025, which was 2% lower than in 2024.

In 2025, there were 89,130 “breathing spaces” registered – the highest annual total since the start of the scheme in 2021. The debt respite schemes allow people time to get on top of their debts before entering any formal insolvency procedure.

Last year saw 87,813 standard breathing space registrations and 1,317 mental health breathing space registrations.

Tom Russell, president of trade body R3, said: “Many households are struggling financially, using credit to pay for everyday essentials like food and household bills, with debt charities reporting busy helplines in January, as people seek advice on how to pay priority bills.”

The Insolvency Service said 23,938 company insolvencies were recorded across England and Wales in 2025, similar to 2024 levels when 23,880 cases were recorded, and 5% lower than in 2023, which had the highest annual number since 1993, the report said.

Matthew Richards, joint head of restructuring and insolvency at accountancy and business advisory group Azets, said: “One issue that has hit firms hard is the increases to employers’ national insurance and national minimum wage, which came after years of rising costs, shrinking margins and cautious customer spending, and were the final straw for many firms who were struggling to stay solvent.

“Businesses also had to contend with inflation remaining above target levels, interest rates not falling as fast as predicted, and the ripple effect of the US tariffs which were announced at the start of the year.”

He said the retail industry has been particularly affected, adding: “A bleak Black Friday and a dull ‘golden quarter’ were a body blow for retailers at the end of a tough year, and came at a time when many were desperate for a financial shot in the arm.

“We expect the high street will continue to be hit hard in 2026 as the bigger retailers cut costs and sites, and the struggling smaller ones either close or move towards an online model, and ultimately, this is likely to lead to the high street contracting further.

“The construction industry has also suffered as rising material and staff costs became unsustainable for businesses in a sector that runs on tight margins, long payment times and legacy contracts whose predicted profits may not materialise once the job has been completed.

“While the industry appears more confident about its fortunes this year, cost, labour and payment pressures will continue to affect firms as much in 2026 as they did in the previous 12 months.”

Todd Davison, managing director at Purbeck Insurance Services, said: “As costs remain high and cashflow tight, ensuring viable SMEs (small and medium-sized enterprises) can access funding at the right time will be critical to preventing otherwise avoidable failures.”

Matt Corkery, managing director, economics, at risk and financial advisory solutions provider Kroll said: “The year ahead is likely to test resilience even further as higher taxes, wage pressures and continued geopolitical and technological disruption feed through.

“For businesses, 2026 will be less about riding out short‑term volatility and more about adapting early to structural shifts in costs, technology, supply chains and financing conditions.

“Those that are proactive stand the best chance of staying ahead of renewed pressure across key sectors such as manufacturing, construction, retail and hospitality.”