Navigating the Challenges of Small Business in the UK: Insights from an Insolvency Practitioner

Owning a small business in the UK these days feels akin to steering a ship through a relentless storm.

The Kent Invicta Chamber of Commerce Quarterly Economic Survey for the first quarter of 2025 highlights pressures from increases in minimum wage, national insurance, business rates and energy costs, squeezing margins tighter than ever.

Many business owners are struggling to manage cash flow, which is often the lifeblood of their operations. The old adage “turnover is vanity, profit is sanity, and cash flow is king” rings true now more than ever and to enable this liquidity, businesses are freezing recruitment, cutting back on training and halting business investment to ensure their survival in these turbulent times.

Add to this the Capital Gains and Inheritance Tax changes and since the election in 2024 we have seen a significant withdrawal of funds from businesses, with £57 million siphoned into personal bank accounts, underscoring a growing apprehension about the future.

How to tell if a business is in trouble

Sadly, this storm will not be survivable for all businesses. A constant lack of cash flow signals trouble as do high interest payments and frequent debt repayment delays disrupting supply chains and future cash flow. All signal deeper financial and management issues. Falling margins can sap morale, elevate stress and increase erratic decision-making, causing key personnel to jump ship.

Many business owners find themselves overwhelmed by the mounting pressures and the fear of losing their livelihood, leaving them feeling very lost and alone.

Is it time to jump ship?

It is very easy to determine whether your company is insolvent. The Insolvency Act lays down a few simple tests, two of which stand out:

Balance sheet test: Are your assets less than your liabilities? Yes, you are unfortunately insolvent; No, you are probably not insolvent.

Cashflow test: Can you pay your debts as they fall due? Yes, you are not cashflow insolvent; No, you are probably trading insolvently and potentially have a problem.

Early action is vital

All may not be lost, but early action is vital. By seeking expert advice and support while there are still opportunities to change course, business owners can explore various options to rescue their business. At Frost Group, we support businesses, and their owners, to restructure and continue trading.

Experienced insolvency practitioners can assess the financial situation, identify the root causes of distress, and implement strategies to turn the business around, helping navigate these challenging times.

If you have explored every option and know your business is in trouble, DO NOT PANIC. It may only be a temporary problem that you can trade out of. You MUST seek further advice NOW, otherwise if it fails at a later date, you could find yourself answering questions made trickier as the bad outcome is already known. 20/20 hindsight can be a terrible bedfellow and might lead to you being asked to contribute towards the deficiency to creditors.

Reach out to a licenced insolvency practitioner for support. The sooner, the better. Every client’s needs are different when it comes to liquidation, and they will be able to talk you through your options and guide your next steps. If you need support to close an insolvent business, please contact Frost Group on 0345 260 0101 for a free confidential consultation or email enquiries@frostgroup. co.uk. We offer a range of liquidation options, with transparent pricing based on the complexity of the service required. Our friendly and compassionate team is here to help guide you through the CVL process and make a distressing time as easy and stress-free as possible.

Additionally, if you are lucky enough to be retiring or want a solvent exit, we can also help you to navigate the process of closing operations, leaving no outstanding matters and providing a potentially tax efficient and lucrative exit for company shareholders. We have fixed fee packages for the simplest to most complex liquidations at extremely competitive prices and are here to help.

Jeremy Frost, Licenced Insolvency Expert and Director of Frost Group

Navigating business financial issues can be worrying and confusing. Frost Group’s experts are with you every step of the way.

Frost Group has more than 20 years’ experience in providing robust, honest, transparent and practical guidance and support for businesses who need to restructure or liquidate.

Our experienced and friendly team are your expert advisers committed to helping you achieve the best possible outcome.

With our robust approach, we help businesses understand what is happening at every stage of the process – so that there are no surprises.

Business Rescue

Our business rescue packages offer a lifeline to help keep active insolvent businesses trading.

• Restructuring

• Refinancing

• Partnership Debt

• Time to Pay Your HRMC Debt

• Administration

• Creditors Voluntary Arrangement (CVA)

Business Insolvency Services

We understand it’s not easy – and we help businesses navigate a complex and worrying journey, in the simplest way possible. We work hand-in hand with businesses to design a solution which suits them best, providing clear, transparent and understandable guidance.

Our experienced and friendly team are your expert advisers committed to helping you achieve the best possible outcome.

• Creditors’ Voluntary Liquidation (CVL)

• Compulsory Liquidation

• Receivership us

OTHER BUSINESS SUPPORT

• Members Voluntary Liquidation (MVL)

• Help For Creditors

• Insolvency Mediation

• Commercial Mediation

• Shareholder & Partnership Mediation

Investor Enhance

Unlocking investments with bespoke liquidation and restructuring solutions in synergy with tax advice