FINANCE
Business under pressure: What’ s driving insolvency in the South West?
Dan James, Partner, Business Recovery & Insolvency at Albert Goodman, talks to TBE about the rising challenges facing local firms, from construction and hospitality struggles to wage pressures, tax uncertainty and creditor action.
The South West had been performing better than other regions, but July saw a shift, with R3 the UK’ s trade body for insolvency and restructuring professionals reporting insolvency-related activity rising by 11 %. The team at Albert Goodman have had a busy year assisting businesses across a range of sectors. It seems that whilst the South West has previously shown resilience compared to other parts of the UK, mounting pressures are now catching up.
What’ s driving that divergence from the national trend?
It’ s likely a mix of local and sector-specific factors. We’ ve seen a noticeable increase in construction and hospitality cases. Hospitality is still recovering from weaker consumer spending and the recent rise in National Insurance contributions. A rise in creditor action and smaller liquidations can also push regional numbers up, even if national figures are slightly down.
Creditsafe reports 2,353 UK businesses entered insolvency in June 2025, with construction hardest hit. Is that reflected in your caseload? Yes, we’ ve seen an uptick in construction-related cases. Smaller firms are struggling with the cost of borrowing post- Covid, while larger ones are facing delays in major projects. These delays hit cash flow hard and can quickly lead to insolvency.
How are rising wage bills and the April increase in employer National Insurance contributions affecting business solvency in the region? The impact is significant, especially for labour-intensive, low-margin sectors like hospitality, care, entry-level retail and some construction SMEs. Many of these businesses have little pricing power, so the increased payroll burden has led to squeezed cashflow, hiring freezes, and redundancies, which in turn affects demand for local suppliers..
Are falling retail sales and hospitality job losses contributing to regional vulnerability? Absolutely. National retail sales volumes fell sharply in May 2025, around 2.7 % month-on-month, and hospitality has been one of the worst-hit sectors for job losses since the Budget. The South West has a high concentration of tourism and independent retailers, so these national trends are hitting the region hard.
What are the key factors influencing business confidence right now? Rising costs and falling demand. Businesses are facing higher payroll costs, uncertainty around future tax and regulation, squeezed household budgets, and unpredictable supply chain and energy prices. Even with recent interest rate adjustments, borrowing remains expensive for many. All of this is keeping confidence fragile.
What early warning signs should directors watch for?
Keep a close eye on cash. Warning signs include falling bank balances, delayed supplier payments, rising overdraft usage, creditor pressure( like statutory demands) and missed PAYE / NIC liabilities. Operational red flags include losing key customers, repeated late payments, warranty claims in construction, or falling bookings in hospitality. If any of these appear, seek advice early.
Are directors taking proactive steps or is there still a tendency to delay?
It’ s mixed. Larger firms often have better data and act earlier, renegotiating terms, cutting costs or exploring restructuring. But many businesses still wait until statutory pressure mounts, often due to optimism, fear of reputational damage, or lack of cash for turnaround costs. Those who act early tend to have better recovery options.
Are CVAs and restructuring plans being used effectively in the South West, or are liquidations still dominant?
Liquidations( CVLs) remain common, especially for smaller firms. But formal rescue tools like Administrations, CVAs
( Company Voluntary Arrangements) and restructuring plans are being used more where there’ s a viable business and creditor support. CVAs are harder to implement when HMRC is a major creditor due to their preferential status. Restructuring plans are still rare but growing, especially as costs become more manageable. These plans can allow for a“ cram down” of HMRC debts, improving returns for unsecured creditors.
How do you advise businesses weighing formal insolvency procedures vs informal turnaround strategies?
If the business is viable and creditors are open to negotiation, informal turnaround is worth exploring, for example tight cash management, renegotiating terms or short-term funding. If restructuring is possible, formal tools like CVAs or restructuring plans can help. But if enforcement risks are immediate or cash control is lost, administration or liquidation may be necessary. We’ ve had success stories this year where businesses were saved and jobs retained through accelerated administration sales. The key is to seek specialist advice early, even just to understand your position and director duties.
How will speculation about tax increases and the welfare U-turn shape insolvency risk in the months ahead?
Fiscal policy changes always create uncertainty and raise risk. Speculation about higher taxes or retroactive changes makes it harder to plan and price effectively and may reduce consumer disposable income. That combination increases insolvency risk for firms already on the edge, particularly small, consumer-facing and labour-intensive businesses.
Are international trade tensions and supply-chain disruptions affecting the South West more than other regions?
The South West is affected, but not uniquely. Regions with higher manufacturing or export intensity feel trade friction more. The South West has pockets of manufacturers and food exporters who are vulnerable to disruption, so international tensions do have a knock-on effect locally.“ the increased payroll burden has led to squeezed cashflow, hiring freezes, and redundancies”
What’ s your message to South West business owners feeling uncertain?
Be proactive. Monitor cash weekly, scenario-plan( best / worst / most-likely), and preserve liquidity by deferring non-essential spend and reviewing contracts. Talk early to creditors, landlords and advisers. Stress-test payroll scenarios. Delaying advice reduces options and increases personal risk. If you’ re unsure where to start, produce a short, objective cash-flow forecast, ideally for 12 weeks, but even four to six weeks is a good start, and review your creditor position regularly.
Do you expect insolvency rates in the South West to stabilise, rise or fall through the rest of 2025?
I expect a slight increase through the autumn, with potential stabilisation if consumer confidence and policy clarity improve. It will depend on spending trends, payroll costs and whether lenders and landlords remain flexible. If cost pressures persist and fiscal uncertainty continues, the South West’ s earlier uptick could become a sustained rise, even in regions that had previously improved.
dan. james @ albertgoodman. co. uk 0773 635 4704
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