With one in 198 companies in England and Wales entering insolvency in the past year, Director First’s Chris Worden says two straightforward tests give directors the early warning they need
KIRKHAM, England, Aug. 26, 2026 /PRNewswire/ — Directors are still leaving it too late to seek advice when their company runs into difficulty, according to Director First, which is urging owners to treat professional advice as a first step rather than a last resort.
Insolvency Service figures show 1,845 registered company insolvencies in England and Wales in June 2026, 10% lower than a year earlier, with creditors’ voluntary liquidations making up 74% of the total. Over the 12 months to June, one in 198 companies on the effective register entered a formal insolvency procedure.
“The figures are easing, but that’s cold comfort if it’s your company,” said Chris Worden, Managing Director at Director First. “What we see day in, day out is directors who knew something was wrong six or nine months before they picked up the phone. By then the options have quietly closed off, one by one.”
Two tests every director should know
Director First is encouraging owners to regularly apply the two statutory tests for whether a company is unable to pay its debts, set out in section 123 of the Insolvency Act 1986:
- The cash flow test – can the company pay its debts as and when they fall due?
- The balance sheet test – is the value of its assets less than its liabilities, including contingent and prospective ones?
“As a sense-check, these aren’t complicated,” Worden said. “Any director can sit down with their management accounts and a 13-week cash flow forecast and get a real feel for where they stand. If either answer is uncomfortable, that isn’t a reason to look away. It’s the moment to get advice.”
Neither test is mechanical, and legal insolvency is a judgement to be reached with advice. But timing matters. If a company later enters insolvent liquidation or administration, a director who carried on when they should have concluded there was no realistic way out can be ordered to contribute to its debts personally, unless they took every step to minimise loss to creditors.
“That last part is the argument for early advice,” said Worden. “The law protects directors who face the problem and can show what they did about it. It’s the ones who carried on hoping who end up exposed. Calling an adviser isn’t the same as calling time on your business.”
Notes to editors
Insolvency Service data, June 2026 (England and Wales)
- 1,845 registered company insolvencies in June 2026, similar to May 2026 (1,849) and 10% lower than June 2025 (2,048)
- Comprising 276 compulsory liquidations, 1,364 creditors’ voluntary liquidations, 191 administrations and 14 company voluntary arrangements. There were no receivership appointments
- CVLs accounted for 74% of all company insolvencies in the month
- The 12-month rolling insolvency rate to June 2026 was 50.5 per 10,000 companies on the effective register – equivalent to one in 198 companies entering insolvency between 1 July 2025 and 30 June 2026. This was down from 52.4 per 10,000 in the 12 months ending 30 June 2025, and well below the 2008-09 recession peak of 113.1 per 10,000
- Insolvency volumes since the second half of 2022 have run at levels last seen during the 2008-09 recession, though volumes have eased since late 2025
- Highest-volume sectors in the 12 months to June 2026: construction (3,805 insolvencies, 17% of cases where industry was captured); wholesale and retail trade including motor vehicle repair (3,463, 15%); accommodation and food service (3,233, 14%); administrative and support services (2,196, 10%); professional, scientific and technical activities (1,930, 8%); manufacturing (1,857, 8%)
Source: Insolvency Service, Commentary – Company Insolvency Statistics June 2026, accredited official statistics, published 17 July 2026. https://www.gov.uk/government/statistics/company-insolvencies-june-2026/commentary-company-insolvency-statistics-june-2026
Monthly totals and the procedure breakdown are in section 2.1 and Table 1; insolvency rates in section 2.3, Table 2 and Figure 4; sector figures in section 2.4 and Figure 5.
Pressures on businesses
Commonly cited pressures include sustained cost increases, tighter margins, late payment from customers, higher borrowing costs and softer consumer demand. The Insolvency Service does not publish data on the causes of individual insolvencies.
Sector risk: volume versus rate
Sector figures in monthly releases are volumes, not rates, and are partly driven by how many companies are registered in each sector. The Insolvency Service states that insolvency volumes by industry do not reflect the relative likelihood of companies in a given sector entering insolvency.
For relative likelihood, the Insolvency Service’s Business Insolvency Demography 2015 to 2025 (published 19 June 2026) gives rates per 10,000 businesses for 2025:
- Accommodation and food service activities had the highest rate of any sector, at 268 insolvencies per 10,000 businesses – the highest every year since the series began in 2015
- Of the top nine industries by number of businesses, real estate activities had the lowest rate, at 60 per 10,000
- By age, businesses aged 7 to 10 years had the highest rate (170 per 10,000); those under 2 years had the lowest (37 per 10,000)
Source: https://www.gov.uk/government/statistics/business-insolvency-demography-2015-to-2025
Data quality
Figures for England and Wales are seasonally adjusted, except CVAs, moratoriums, restructuring plans and receivership appointments, where volumes are too low. All figures are provisional and subject to revision.
Rates are calculated separately for each UK jurisdiction, so England and Wales figures should not be presented as UK-wide. In the 12 months to June 2026 the rate was 50.8 per 10,000 companies in Scotland and 40.8 per 10,000 in Northern Ireland.
Legal references
- Insolvency Act 1986, s.123(1) (cash flow test) and s.123(2) (balance sheet test)
- BNY Corporate Trustee Services Ltd v Eurosail-UK 2007-3BL plc [2013] UKSC 28 – interpretation of both tests; the balance sheet test is not the accounting test, and the cash flow test covers debts falling due in the reasonably near future as well as those presently owed
- BTI 2014 LLC v Sequana SA [2022] UKSC 25 – directors must consider and give appropriate weight to creditors’ interests once they know, or ought to know, that the company is insolvent or bordering on insolvency, or that an insolvent liquidation or administration is probable
- Insolvency Act 1986, s.214 (wrongful trading, liquidation) and s.246ZB (wrongful trading, administration), including the defence at s.214(3)
About Director First
Director First Insolvency Ltd is a director advisory firm, created to provide clear, practical insolvency advice for UK company directors facing company debt, financial difficulty, creditor pressure or potential liquidation.
Director First focuses exclusively on supporting directors of limited companies. Its advisory approach is built around protecting directors, clarifying legal responsibilities and identifying the most appropriate route forward, whether that involves business rescue, restructuring, a company voluntary arrangement, administration or creditors’ voluntary liquidation.
Media Contact
Chris Worden chris@directorfirst.co.uk
www.directorfirst.co.uk
Chris Worden is available for interview, comment and case-study-led features.
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