ONE in 395 in England and Wales entered insolvency in 2025 as experts warned it “reveals a deeply fragmented economy”.
In 2025, the rate of individual insolvency in England and Wales was 25.3 per 10,000, meaning that one in 395 entered an insolvency procedure during that year. This was higher than the one in 415 (24.1 per 10,000) in 2024, new data shows.
At regional level, the North East of England had the highest individual insolvency rate (33.8 per 10,000), while individuals in London had the lowest (16.2 per 10,000).
The North East has been the region with the highest rate of insolvency every year since 2008, while London has been the region with the lowest rate each year since the series began in 2000.
The other seven English regions, as well as Wales, all had rates between 23.7 and 29.2 per 10,000. The insolvency rate was higher than the five-year (2020 to 2024) average in all regions of England and Wales.
The female insolvency rate (27.6 per 10,000) was higher than the male rate (23.6 per 10,000) as has been the case each year since 2014. Women had a higher rate of insolvency than men in all age groups except for those aged 65 and over.
This reveals a deeply fragmented economy
Darryl Dhoffer, Founder at Bedford-based The Mortgage Geezer, said the UK economy is “deeply fragmented”.
He added: “The 2025 insolvency data is a sobering reflection of a ‘K-shaped’ recovery in the UK. Seeing one in 395 enter insolvency highlights that while macro-stats might show growth, the ‘cost of living’ hangover is still crippling households. This reveals a deeply fragmented economy.
“The widening gap between the North East (33.8) and London (16.2) suggests that wealth concentration in the capital acts as a buffer, while the North remains exposed to structural wage stagnation. The gender gap is particularly telling, higher female insolvency likely reflects the ‘pink tax’ of childcare costs and emphasis of women in lower-paid, part-time sectors hit hardest by inflation.
“The North East’s 17-year streak of high insolvency stems from a transition away from industrial jobs toward a service economy that hasn’t yet provided the same wage security, leaving residents with less discretionary income to weather financial shocks.”
Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, said there is a “debt crisis” in the UK.
He added: “The 2025 surge in UK insolvencies to 1 in 395 highlights a structural debt crisis where stagnant wages finally buckled under high interest rates. In Cornwall and the Southwest, this trend is driven by a ‘seasonal trap’ and a severe housing paradox.
“Despite a booming tourism sector, local wages remain roughly 15% below the national average, while the ‘staycation’ effect has pushed rents to unsustainable levels. This creates a cycle of in-work poverty where full-time earnings cannot cover basic costs. Unlike London’s diverse economy, Cornwall relies heavily on small businesses and self-employment.
“The 2025 collapse of regional support bodies like Visit Cornwall, combined with rising operating costs, forced many micro-business owners into personal insolvency. While the Northeast remains the national hotspot due to long-term deindustrialization, the South West’s crisis is defined by a “cost of paradise” gap that leaves residents with no financial buffer against inflation.”
It highlights a structural debt crisis
Anita Wright, Chartered Financial Planner at Ribble Wealth Management, said the foundations of the UK are weak.
She added: “This rise in insolvencies is what you would expect in an economy burdened by too much debt, weakening purchasing power and slowing real activity. This is what happens when currency debasement, debt dependency and weakening economic conditions finally feed through to ordinary households.
“Rising prices and higher borrowing costs do not create prosperity, they erode real purchasing power and expose financial fragility. In that framework, insolvencies are not an anomaly. They are a symptom of an economy that looks more resilient in nominal terms than it really is underneath. The UK has been built on debt rather than on productivity and savings.
“When that sort of growth model starts to fail, the consumer is one of the first places the strain shows up. Higher insolvencies therefore reveal an economy where the headline system still functions, but the foundations are weaker than policymakers would like to admit.”
Colette Mason, Author & AI Consultant at London-based Clever Clogs AI, said AI is having an effect on the UK economy.
She added: “The region built its post-industrial recovery substantially on call centre work, lower-skilled, lower-paid, but plentiful and stable enough to keep households solvent. Customer services employment across the UK has fallen by an estimated 15% over the past five years as AI and automated systems absorb routine queries.
“Those jobs didn’t disappear evenly. They disappeared fastest in the places that depended on them most, and often on predominantly female office roles. Rising insolvency rates in 2025 are being reported as a cost of living story, an interest rate story, a consumer confidence story.
“All of that is true. But underneath it is a quieter labour market shift, hiring languishing, entry-level roles not backfilled, the kind of steady employment that keeps people just the right side of solvent quietly contracting with nothing to take its place.”
A warning signal for consumer-facing businesses
Rohit Parmar-Mistry, Founder at Burton-on-Trent-based Pattrn Data, said this is a warning signal for consumer-facing businesses.
He added: “This is the cost of living crisis finally showing up in the paperwork. A rising insolvency rate says households have run out of slack. After years of high inflation, higher mortgage and credit costs, and weak real wage growth, more people are hitting the point where ‘tightening the belt’ is no longer a strategy.
“It is also a warning signal for consumer-facing businesses: demand looks stable right up until people cannot smooth shocks with overdrafts and buy now pay later. The North East pattern is the UK’s long-running regional imbalance made visible. Where incomes are lower and employment is more volatile, you see higher debt vulnerability and fewer buffers.
“Add a higher energy burden and less access to stable, well-paid work, and a small shock becomes insolvency. The fix is not moralising about personal finance. It is good jobs and targeted support that stops people falling into high-cost credit in the first place.”
Photo by Hannah Thompson on Unsplash.
