Businesses under pressure – Would you be able to recognise the warning signs?

An increase in the monthly number of company insolvencies, as well as a rise in the unemployment rate and slow GDP growth, all highlight the continued financial strain facing businesses.

The latest government statistics showing that corporate insolvencies in England and Wales increased by four per cent in January 2026, compared to the previous month.

Mark Davies, North Wests chair of R3, the UK’s restructuring, turnaround and insolvency trade body, said: “January is often a tough month financially for businesses and the latest monthly rise in insolvencies reflect the dismal, rain-soaked start to the year the UK has endured.

“However, there is a ray of sunshine with corporate insolvencies 14 per cent lower than the same month in the previous year.

“Businesses across several sectors haven’t had the results from the ‘Golden Quarter’ boost they had hoped for. As a result, January has slightly become a tipping point, where high costs, disappointing sales and year-end financial pressures converge.”

Meanwhile, the unemployment rate has reached a five year high of 5.2 per cent and GDP also grew slowly at 0.1 per cent in December, with construction recording its worst performance in more than four years.

Small and medium size (SME) businesses are particularly exposed to cashflow pressures and late payments, with construction business especially affected.

A recent report by the Business and Trade Committee found SMEs are owed tens of billions of pounds in unpaid invoices and noted that late payments are responsible for the closure of 38 UK businesses every day.

Recognising the early warning signs of financial distress is critical. If you are noticing issues like persistent late payments, growing debts, or difficulties meeting payroll obligations then it is more than likely time to seek professional guidance.

Cash flow issues can escalate quickly – that is why it is vital that business owners and company directors monitor finances closely and seek advice at the first sign of trouble.

Having clear and up-to-date financial information is vital. Cash as ever, is king. So, it is really important that projections and cashflow forecasts are accurate and timely and business leaders are on top of their figures.

Take a look at your payment terms and see if they need to be changed. Have honest conversations with suppliers and customers.

Look at your overheads to make sure you are getting the best deals possible. Assess your office systems and purchasing and ordering processes to make sure you are not incurring unnecessary costs.

Ensure that your stock control is in order and is fit for purpose. Are the right processes in place? Examine and re-evaluate.

Also, be prepared to adapt. As well as looking at areas where costs could be reduced without harming cash inflows, gauge if there are opportunities to be exploited and new markets to explore.

More than ever, in tough times, due diligence on new customers and regular communication with existing ones is really important.

• For advice and to discuss any issues raised by this article please contact me on 01772 430000