According to the latest figures from the Insolvency Service, 393 companies across England and Wales were forced into compulsory liquidation throughout February 2025; the highest figure in over a decade.

What are compulsory liquidations?

Compulsory liquidation is a process triggered by the petition of a company’s creditor, who will ask the court to wind the company up on the basis that it is failing to meet its liabilities and is therefore insolvent. A successful winding up petition will see that the court makes an order to wind the company up and put it into compulsory liquidation. Upon such an order being made, liquidators will be appointed to investigate the company’s affairs and distribute its assets back to creditors.

What is causing the rise in compulsory liquidations?

The soaring rates of compulsory liquidations paints a telling picture of the financial struggles faced by businesses today. The Office for National Statistics has reported that businesses have struggled with increased costs, specifically in relation to labour and goods, throughout March 2025.

Furthermore, a recent report by the BBC has highlighted the effects of the sudden hike in business rates, resulting from the gradual removal of relief that has been in place since the pandemic. As per a report by the BBC, a business in Montpelier has seen their bill rise from £3,837 to a staggering £11,452. Whilst the Government are hopeful to lower these rates by April next year, it is likely that many businesses will be forced into compulsory liquidation before they are able to see such a change.

What are the effects of this rise in compulsory liquidations?

These rising costs have implications far beyond the companies themselves. The justice system has experienced significant delays in recent years and continues to suffer from the impact of the pandemic. Whilst delays in the commercial courts are not quite as severe as other areas, the rise in insolvent companies poses a threat to the efficiency of the system and could result in a possible backlog if the trend continues. Not only would this delay potential returns to creditors, but it would also prolong the strain of legal proceedings faced by directors during this time.

At Farleys, we work with both creditors and directors to achieve the best possible outcomes for our clients, despite current landscapes. If you or your business are affected by the above, please get in touch to see how we are able to help. You can call us on 0845 287 0939 or get in touch by email.