Walk down any UK high street, and you’ll see many signs saying “Closing Down Sale,” “Everything Must Go,” or “To Let.” Many businesses, from small cafés to large stores, are closing rapidly.
According to the Guardian, the UK lost an average of 37 stores daily in 2024, totalling approximately 13,500 businesses for the year. The high street is not just changing; it is disappearing.
What is causing these closures? Rising costs, economic uncertainty, and growing debt are pushing businesses to their limits. Some companies struggle to survive, while others shut down before their losses worsen. However, liquidation is not the only option – some businesses find ways to continue operating.
This article explains why UK businesses face difficulties, what occurs when a company cannot pay its debts, and practical steps owners can take to move forward.
Why More UK Businesses Are Closing
The year 2025 has introduced continuous financial strains for companies throughout the UK. Several crucial factors contribute to the increasing rate of closures:
- The Cost of Living Crisis: As consumers reduce their expenditures, companies – particularly in retail, hospitality, and leisure – are experiencing the pressure. A decrease in customers leads to reduced sales, and for organisations already struggling, that can frequently push them into financial challenges.
- Rising Operating Costs: Costs for energy, rent, salaries, and suppliers have all increased significantly. Even companies making a profit a few years back find it challenging to meet their fundamental costs. In contrast to big companies, many SMEs lack the financial reserves to withstand extended times of increased costs.
- Higher Borrowing Costs: As interest rates reach peaks not seen in years, companies that used to depend on loans or credit to manage cash flow are now struggling significantly to maintain their repayments. This results in entering a debt cycle that is almost unattainable to break free from specific individuals.
What Happens When a Business Can’t Pay Its Debts?
When an organisation cannot pay its debts, it is considered insolvent. If this issue isn’t fixed quickly, it can get worse.
Signs that a company might be nearing insolvency include the following:
- Ongoing cash flow issues
- Struggling to pay suppliers, rent, or wages
- Facing pressure from creditors for payment
When a company runs into financial trouble, the directors must prioritize what is best for the creditors. This often involves exploring options such as reorganising the company, voluntarily liquidating it, or entering administration.
How to Take Control and Find Alternatives
For some companies, liquidation may be the best option. This process involves closing the company, selling its assets, and using the money from sales to pay off creditors as much as possible.
However, liquidation is not always the only option, nor is it always the best one. Many businesses can recover by taking quick and decisive action.
For businesses unsure where to turn, Insolvency Online offers expert-led advice on everything from voluntary liquidation to turning a struggling business around – minus the legal jargon.
Getting expert advice can help leaders explore different strategies, including:
- Company Voluntary Arrangements (CVAs): An agreement to repay debts over time while still doing business. In 2024, England and Wales had 202 CVAs, a 9% increase from 2023. This rise showcases that more struggling companies choose CVAs to stay in business instead of shutting down completely. However, not all CVAs work, as failing to meet repayment conditions can still lead to insolvency.
- Business Restructuring: Review expenditures, work with suppliers to change contracts, or improve operations to make a profit again.
- Refinancing: Look for other funding options to help with cash flow issues.
It’s essential to take action quickly. Waiting too long can limit your options.
What Business Owners Can Do Next
If your business is facing challenges, here’s how to regain control:
- Seek Professional Advice Early: Experts can help you choose the best options for your business, whether you need to restructure, negotiate with creditors, or consider voluntary liquidation.
- Review Your Costs: You can create financial comfort by cutting unnecessary expenses, renegotiating supplier contracts, or finding new ways to make money.
- Communicate with Creditors: Many creditors are open to adjusting payment terms if you have a clear plan. Studies show that small businesses in the UK lost an average of £22,000 each due to delayed payments. Talking about payment terms can help ease financial stress and provide stability.
- Stay Informed: Knowing your rights and responsibilities can help you avoid legal issues.
Conclusion
2025 will be a challenging year for UK businesses, with more closures than expected. Financial struggles are real, but giving up doesn’t have to be the only choice.
Businesses that survive aren’t just lucky; they take action. They seek expert help early, renegotiate debts, and explore other solutions. This can turn things around, even when it seems complicated.
Survival is possible and achievable, but only for those who act now.
