Welsh Business Landscape Shows Mixed Picture with Rising Failures and New Ventures
The latest analysis from insolvency and restructuring trade body R3 reveals a concerning trend for Welsh businesses, with corporate failures increasing during 2025 despite a simultaneous rise in entrepreneurial activity across the nation.
Insolvency Activity Increases Across Wales
According to comprehensive data released by R3, insolvency-related activity in Wales rose from 844 cases in 2024 to 863 last year, representing a 2.3% increase in business failures. This category includes administrations, creditors' meetings, and both voluntary and compulsory liquidations, painting a detailed picture of corporate distress across the Welsh economy.
Bethan Evans, chair of R3 in Wales and partner at Menzies, commented on the findings, stating: "The R3 report shows that businesses, both regionally and nationally, struggled to regain their footing in 2025 after several years of economic challenges."
Start-Up Numbers Show Encouraging Growth
In a contrasting development, the same period saw a significant 8.7% increase in new business formations across Wales. The number of start-up ventures rose from 21,036 in 2024 to 22,863 in 2025, indicating continued entrepreneurial spirit despite challenging economic conditions.
This dual trend of rising failures alongside growing start-up numbers suggests a dynamic but challenging business environment where established companies face significant pressures while new ventures continue to emerge.
National Context and Sector Analysis
The R3 Annual Business Health Report, compiled using data from Creditsafe, places the Welsh figures within a broader UK context. Official statistics from the Insolvency Service show corporate insolvencies in Wales and England increased by 0.2% to reach 23,938 cases in 2025.
Evans elaborated on the national picture: "While inflation has now eased, the cumulative impact of higher costs, tighter credit conditions and weak demand continues to place significant pressure on local companies, particularly smaller and mid-sized firms with limited financial headroom."
Construction Sector Remains Most Vulnerable
Across the United Kingdom, the construction industry continued to account for the highest number of insolvency activities in 2025 with 4,584 cases, despite experiencing a modest 6% reduction compared to the previous year. The sector faced multiple challenges including:
- Rising material costs affecting project viability
- Persistent issues with delayed payments
- Significant skills shortages across trades
- Weakened investor confidence in development projects
Other Sectors Under Pressure
The wholesale and retail sector recorded 4,124 insolvency cases nationally, while accommodation and food services experienced 3,831 cases. These elevated numbers reflect:
- Pressure on profit margins as households reduce discretionary spending
- Businesses struggling to absorb or pass on higher operational costs
- Changing consumer behaviour patterns affecting traditional retail models
Manufacturing insolvencies remained historically high with 2,188 cases nationally, as companies contended with energy costs, supply chain disruption, and subdued export demand affecting international competitiveness.
Expert Advice for Business Survival
Looking ahead to 2026, Evans emphasised the importance of proactive financial management: "As we move into 2026, while cashflow and profit margins remain under pressure, seeking professional advice at an early stage from an R3 member can make a critical difference, giving viable businesses the best chance of survival and recovery."
The report indicates that while the business environment remains fragile, particularly for established companies facing accumulated challenges from recent years, the entrepreneurial ecosystem continues to demonstrate resilience through new business formation.
