Official government statistics have revealed a stark picture of financial distress, with the number of people in England and Wales becoming insolvent reaching its highest level in 15 years during 2025.
A Surge in Personal Financial Collapse
According to data released by the Insolvency Service, a total of 126,240 personal insolvencies were recorded last year. This marks a significant 7% increase compared to the 2024 figure and represents the highest annual total since 2010, when the aftermath of the global financial crisis pushed numbers to 134,971.
The figures encompass three main types of personal insolvency: bankruptcies, Individual Voluntary Arrangements (IVAs), and Debt Relief Orders (DROs). Notably, the use of DROs, a form of insolvency for those with lower debts and assets, hit a record level. In 2025, 46,939 DROs were registered, the highest number since the scheme's introduction in 2009.
Key Drivers Behind the Rise
Experts point to a combination of policy changes and persistent economic pressures. The sharp rise in DROs is partly attributed to reforms implemented in 2024, which removed a £90 administration fee and expanded the eligibility criteria, making the debt solution accessible to more struggling individuals.
While IVAs also increased by 7% to 71,841, they remained below the record highs seen between 2019 and 2022. Bankruptcy numbers, at 7,460, saw a slight 2% dip from 2024 and stayed at less than half of their pre-2020 levels.
A further indicator of widespread financial strain is the record use of the 'Breathing Space' scheme, which offers a temporary respite from creditor action. In 2025, 89,130 registrations were made under this scheme, the highest annual total since its 2021 launch.
Businesses Under Parallel Pressure
The financial squeeze was not confined to individuals. Company insolvencies across England and Wales remained elevated, with 23,938 recorded in 2025—a figure similar to 2024 and only 5% lower than 2023's 30-year peak.
Matthew Richards, joint head of restructuring and insolvency at Azets, highlighted a perfect storm for businesses. "One issue that has hit firms hard is the increases to employers’ national insurance and national minimum wage," he stated, noting these came after years of rising costs and shrinking margins.
He identified the retail and construction sectors as being under particular duress. A disappointing festive trading period dealt a "body blow" to retailers, while construction firms grappled with unsustainable material and labour costs amid tight margins. Richards warned that the high street is likely to contract further in 2026 as retailers cut costs or shift online.
Todd Davison, Managing Director at Purbeck Insurance Services, emphasised the ongoing challenge for small and medium-sized enterprises (SMEs). "As costs remain high and cashflow tight, ensuring viable SMEs can access funding at the right time will be critical to preventing otherwise avoidable failures," he said.
The data underscores a period of significant economic challenge for both households and businesses across England and Wales, with the legacy of high costs and cautious spending continuing to drive financial instability.
