West Midlands businesses continued to face intense financial pressure throughout 2025, with the region recording one of the highest percentage increases of insolvency-related activity in the UK, according to a new report from R3 - the trade body for restructuring, turnaround and insolvency professionals.
The figures for the West Midlands show an 11.7% rise compared to 2024 – only Northern Ireland ranked higher at 20.2% - and include administrations and creditors’ meetings as well as voluntary and compulsory liquidations.
The R3 Annual Business Health Report, compiled using data from Creditsafe, also looks at sector trends across the UK, with the national picture indicating a fragile operating environment for many local businesses.
Construction continued to account for the highest number of insolvency activities in the UK in 2025 (4,584 cases), despite a modest reduction of 6% on the previous year. The sector was exposed to rising material costs, delayed payments, skills shortages and weak investor confidence.
Wholesale and retail (4,124 cases) and accommodation and food services (3,831 cases) also saw elevated insolvency activity numbers, reflecting pressure on margins as households reined in discretionary spending and businesses struggled to absorb or pass on higher costs.
Manufacturing insolvencies remained historically high with 2,188 cases, as companies contended with energy costs, supply chain disruption and subdued export demand.
R3 Midlands chair Stephen Rome, a partner at Penningtons Manches Cooper in Birmingham, said: “The R3 report shows that businesses, both regionally and nationally, struggled to regain their footing in 2025 after several years of economic challenges.
“While inflation has now eased, the cumulative impact of higher costs, tighter credit conditions and weak demand continues to place significant pressure on local companies, particularly smaller and mid-sized firms with limited financial headroom.
“As we move into 2026, while cashflow and profit margins remain under pressure, seeking professional advice at an early stage from an R3 member can make a critical difference, giving viable businesses the best chance of survival and recovery.”
