2025 marked a year of increased activity in the number of distressed operational real estate cases we dealt with, resulting in a material rise in the number of businesses we were instructed to sell. Our distressed sale mandates were 22% up compared with 2024 and exceeded the pre-pandemic level of 2019 by 12%.

Company insolvencies accounted for 40% of all our distressed sale mandates - a main driver for this was a rise in creditor action - and an increasing number of cases we dealt with were due to HMRC pursuing debt and issuing winding up petitions. Another factor has been the willingness of alternative funders, who in recent years have increased their share of lending into the markets we operate in, being quicker than their mainstream peers to appoint administrators or receivers to enforce their security and sell assets to recover their loans.

A rise in loan defaults, covenant breaches, and loans not being paid at maturity drove activity in both the refinance and operational real estate sale markets. The availability of alternative debt enabled some distressed businesses to refinance, albeit often at materially higher interest rates. Where refinancing was not viable, exit by sale was the alternative, and this factor contributed to a rise in our debt funder-led instructions.

Enduring financial challenges, principally inflation, employment costs and the cost of servicing debt, persisted into 2025, impacting the operational viability of the weakest businesses. Moreover, operators in the sectors led by discretionary spend were additionally impacted by muted consumer confidence due to the cost-of-living crisis.

The Labour Government’s Spring Statement further increased employment costs and introduced higher taxes for business owners, of which we are yet to see the full impact. The Autumn Budget further raised employment costs, with above-inflation National Minimum Wage increases being implemented in April 2026.

The knock-on effect will be decreasing creditor serviceability, leading to increased demand for restructuring and insolvency services from both debt funders and directors. Those who take early action will have more options, time, and resources for recovery rather than waiting until a crisis point, which will significantly limit the potential for a successful turnaround.

The challenging macroeconomic landscape in 2025 is likely to continue into 2026, and more non-performing operational real estate coming to the market is an inevitable consequence.