UK Restructuring & Insolvency Market 2026: Early action by funders and directors alike is the new survival strategy

A discussion of what the commentary says, what we are seeing in our practice in reality, and what we think finance and restructuring professionals need to know, is below.

1. The big picture: strain, not shock 

The consensus appears to be that 2026 will bring sustained pressure rather than systemic crisis. Distress is becoming more widespread across sectors, and beyond those we traditionally see it in. Creditor approaches are increasingly varied and no longer easy to predict, and sophisticated restructuring tools (such as restructuring plans) remain out of reach for most SMEs due to cost, uncertainty, or outcome and complexity. 

2. Key market trends 

Pre-insolvency work is increasing, not reducing formal appointments.

• Advisory engagements are rising, yet many quickly convert into formal insolvency.
• Directors are seeking advice earlier but, by the time they do, the positions of their businesses are often more severe than realised. The head in the sand approach appears to be catching up now, as problems haven’t gone away and illusive new investment hasn’t materialised.
• Liquidity issues are crystallising rapidly as investor and lender confidence disappears. 

Distress is spreading beyond the usual sectors.

• Retail, hospitality, and construction remain under acute pressure, but 2025 exposed vulnerabilities in sectors previously seen as growth sectors, including medtech, software, renewables, and AI.
• SMEs in these sectors borrowed heavily for R&D on the assumption refinancing would be easy, which did not prove to be correct when interest rates rose and investor risk appetite fell.
• Investors and lenders are becoming less keen on long development cycles and pre-profit business models.

Creditor behaviour varies substantially.

• Mainstream lenders continue to show forbearance, extending repayment holidays and facilities to give borrowers time to restructure or sell.
• In contrast, alternative and tertiary lenders enforce security more swiftly, and appoint administrators or receivers without delay. They have their own investors to answer to and who expect returns, and they are not prepared to delay.
• HMRC is adopting a more aggressive approach: HMRC winding-up petitions are increasing. The days of numerous repayment plans and forbearance are gone. 

Restructuring plans remain a luxury for the few who can afford them.

• The cost, complexity, and uncertainty around cram-down means restructuring plans are still largely inaccessible to SMEs. CVAs and consensual workouts remain the most practical alternative for most SME businesses. 

3. What’s driving the pressure?

• A perceived anti-business attitude from and environment created by government policy is creating reduced confidence amongst investors and business owners alike.
• Consequent weak consumer confidence is a significant problem for an increasing number of businesses.
• Geopolitical uncertainty – including in Ukraine and the Middle East – continues to erode business confidence.
• High operating costs coupled with reduced spending are affecting retail, leisure, and hospitality.

4. Three priorities for 2026

Those businesses that will survive vs those that won’t will be dictated by:

Early engagement by directors. Waiting until crisis point limits options.

Focussing on asset-level value. Investors and lenders are increasingly looking for ways to identify, protect, and monetise elements of businesses that carry standalone value, such as patents, software and data.

Being realistic about capital. Businesses that reassess underperforming assets and focus on cash are more likely to navigate the year ahead. 

2026 isn’t shaping up to be a year of spectacular collapses, but a year of difficult decisions with a focus on early action.  For finance professionals and professionals advising distressed businesses and / or managing exposure to vulnerable sectors, the message is clear – act early, be realistic, and keep your eyes on the assets that have value.

The Restructuring & Insolvency team at DMH Stallard have extensive experience in advising individuals and insolvency practitioners in relation to personal insolvency, disputes with HMRC, director claims and directors’ disqualification.  Please get in touch or call 03333 231580.