Welcome to 2026 from Stevens & Bolton’s Restructuring & Insolvency team. The last 12 months proved difficult for many businesses, and we saw an increasing number of company burials using the creditors’ voluntary liquidation (CVL) procedure. At a macro level, there were some high-profile restructuring attempts thanks to the likes of Thames Water and Claire’s, with retail and hospitality casualties, including River Island, TGI Fridays, Pizza Hut, Leon and Sixes all entering insolvency processes.

So, what can we expect during the next 12 months? What curveballs might businesses need to navigate, and what themes are likely to emerge? We canvassed Stevens & Bolton’s R&I specialists.

1. A challenging year ahead for many sectors

With difficult trading conditions set to persist through 2026, Tim Carter, Partner and Head of the Restructuring & Insolvency team at Stevens & Bolton, anticipates overall UK restructuring and insolvency activity will remain broadly in line with 2025 levels, though insolvency rates are likely to vary by sector and also in terms of the process employed.

The new year brings some cause for optimism, with the Bank of England cutting the Bank Rate in December and UK inflation falling late last year. However, geopolitical tensions persist, bank lending is likely to remain cautious, and the UK remains some way off genuine economic confidence. Consumer spending is forecast to take a hit on the back of November’s budget, whilst the retail and hospitality industries remain heavily exposed to business rates and increases to the national minimum wage. Many fear that the run up to Christmas – the so-called “golden quarter” – was weaker than expected, leaving many in the retail and hospitality space on the back-foot going into 2026.

Tim identified the following sectors as those most likely to struggle in 2026:

• Traditional retail and hospitality: high operating costs and business rates, coupled with subdued (or at least discerning) consumer spending, continue to present challenges for both online and physical retailers. Meanwhile pubs are closing in record numbers and are campaigning for more government support.
• Construction: construction remains one of the UK’s most distressed business sectors, and is the focus for Louise Corcoran, below.
• Manufacturing: the UK’s embattled manufacturing sector continues to suffer at the hands of cheaper overseas competitors, supply chain disruption and innovation challenges.
• Automotive supply: overseas competition as well as changing government policy on electric vehicles continue to dampen the mood in this sector. Lana Ewing discusses this further below.
• Commercial real estate in the office sector: London might be suffering a shortage of prime office locations, but demand for office space in other commercial centres remains subdued as hybrid working patters persist. With the UK recently crowned as the hybrid working capital of Europe, pressure will increase on landlords to repurpose their office premises if demand remains subdued into 2026. 

Tim points out that directors of struggling businesses are increasingly incentivised to act quickly – see Matthew Padian’s predictions for 2026 and greater scrutiny of director behaviour below. Early action has the twin benefit of saving viable businesses through pre-pack administration and helping to minimise risk to directors, and therefore Tim expects that we might see an increase in pre-packs this year. In terms of other company rescue processes, Lucy Trott discusses below the challenges of the restructuring plan and the potential return of the company voluntary arrangement (CVA). 

2. Employee Rights get a re-work: Additional complexities for both stressed businesses and insolvency officeholders

Managing Associate Helen Martin highlights the impact of the Employment Rights Act 2025 (ERA 2025), which introduces several significant reforms to UK employment law, some of which will be phased in over the course of 2026 and 2027. This comes in the context of a general increase in the cost of employing staff, including the rise in national minimum wage and employer national insurance contributions.

Of particular note is a new dual-threshold system for triggering collective consultation obligations under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). Currently, employers must consult with representatives of affected employees when proposing to dismiss 20 or more employees at a single establishment within a 90-day period. The ERA 2025 retains this rule but will introduce an additional trigger for redundancies across multiple establishments within a business, with the new threshold to be set following consultation. For multi-site operators there will be a risk that relatively small-scale ‘per site’ headcount reductions, which would not previously have triggered TULCRA consultation requirements, may cumulatively trigger the requirement to consult (and the associated duty to submit form HR1 to the Secretary of State) once the relevant provisions of the ERA 2025 come into force in 2027.

ERA 2025 also changes the financial stakes around collective consultation. From April 2026 the maximum protective award for failure to inform and consult on collective redundancies will double from 90 to 180 days’ gross pay per affected employee. In its response to the government’s consultation on strengthening the collective consultation framework, R3 noted that “imposing punitive awards in insolvency situations could have unintended consequences, such as discouraging rescue, ultimately hindering successful restructuring, and harming employees’ and creditors’ interests”. The doubling of the maximum protective award increases the incentive for employees and unions to bring claims, and the potential for a significant increase in employee costs in relation to a distressed business acquisition may affect deal pricing and the risk appetite of potential purchasers. With no special exception in the ERA 2025 for insolvency situations, much will depend on the approach taken by tribunals in practice.

Other notable upcoming changes include an extension of the time limit for bringing employment tribunal claims from three to six months (effective 1 October 2026), the removal of the cap on compensation for unfair dismissal, and a reduction in the qualifying period for unfair dismissal rights from two years to six months (both expected to take effect from 1 January 2027). As well as the obvious increase in financial risk for employers, these changes are expected to lead to a sharp rise in employment tribunal claims, which in turn could lead to longer resolution times.

3. Construction woes will continue

2025 didn’t provide much cause for cheer for construction companies. The government backs more housebuilding, for example, but the figures don’t lie: the number of construction companies in “critical” financial distress is reported to have soared in the past 12 months. The construction sector accounted for approximately 17% of all company insolvencies in the 12-month period to October 2025, the highest figure recorded for any sector.

Senior Associate, Louise Corcoran, doesn’t see the outlook for construction companies changing any time soon and identified the following as reasons for more distress in the construction sector during 2026: 

• Persistent late payments and cashflow fragility: construction firms continue to suffer from chronic late payments, weakening working capital and heightening insolvency risk.
• Rising material and other costs: increasing costs of materials and supplies have continued to erode margins industry wide. Many contractors are unable to pass these increases on to clients, resulting in thin or negative margins that will remain a key driver of distress.
• Subcontractor chain instability: distress at the subcontractor level is triggering a cascading effect across construction projects. Failure of one subcontractor can destabilise entire supply chains, increasing the number of insolvencies in the sector generally.
• Tightening access to finance: higher borrowing costs and cautious lending – trends throughout 2025 – mean refinancing will remain a challenge for many construction businesses during 2026.

4. A CVA comeback

Managing Associate, Lucy Trott, predicts a revival of company voluntary arrangements (CVAs) during 2026. The novel alternative, the restructuring plan, has proven to be a lightning rod for challenges and no longer provides a certain route to a viable restructuring. Conflicting Court of Appeal judgments as to the requirement to consult with and appropriately consider ‘out of the money’ creditor claims have led to further confusion for companies seeking to restructure their debts. It was hoped that the Supreme Court would issue some definitive guidance after permission to appeal was granted in relation to the Waldorf plan, but that appeal has now been discontinued.

Attempts to make the restructuring plan more attractive to small and medium-sized enterprises have also fallen largely flat as concerns remain around the time and costs associated with obtaining court approval of any restructuring plan and valuation difficulties around assessing the “relevant alternative”. The new Practice Statement in respect of Schemes of Arrangement and Restructuring Plans, effective 1 January, setting out the process for management of restructuring plans and schemes of arrangement, reflects the increasingly litigious nature of contested restructuring plans.

The CVA by comparison works well for simpler, operational restructurings and is arguably more appropriate for retailers (with mainly landlord and trade creditors) or other businesses which have a large property portfolio rather than complex financial debt. The Insolvency Service’s Company Insolvency Statistics for November 2025 demonstrated that the number of CVAs in November 2025 was 6% higher than in October 2025 and 29% higher than in November 2024. Whilst CVA numbers remain low compared to historical levels, Lucy anticipates that the recent upward trend will continue into 2026 particularly for SMEs and the mid-market. Meanwhile, we predict that restructuring plans will reduce in number and be targeted more by larger, international companies saddled with complex and unmanageable debt obligations.

5. Persistent challenges in the automotive industry

Trainee solicitor Lana Ewing fears another troubling year ahead for the UK’s automotive industry. UK vehicle production in 2025 experienced a significant downturn and the sector remains shrouded in uncertainty as EV adoption rates fluctuate, government policy changes tack, and consumer hesitancy adds further risk. Electric cars no longer qualify for free road tax and from April 2028 a pay-per-mile tax on both electric and plug-in hybrid cars is being introduced as part of an effort to address the loss in fuel duty from increasing EV sales. Not a great time then for the likes of Jaguar Land Rover to be going all-electric, especially on the back of a major cyberattack during 2025. With China’s BYD overtaking Tesla as the world’s largest electric car seller, UK automotive suppliers face significant challenges in an extremely competitive marketplace. On the plus side, UK public transport networks continue to disappoint, so cars are likely to remain the mode of transport of choice for some time yet – but will the UK consumer’s appetite for new models continue to hold firm?

6. New companies house ID checks to add further delays to insolvency proceedings

Reforms taking place under ECCTA will likely improve the quality of information held at Companies House, in turn assisting insolvency practitioners investigating company affairs. But trainee solicitor Zara Khan predicts that the new Companies House identity verification framework, introduced via the Economic Crime and Corporate Transparency Act 2023 (ECCTA), will add further complications to insolvency proceedings. Since 18 November last year, all new directors and LLP members must verify their identity before incorporation or appointment (with deadlines for completion for existing directors and LLP members staggered through the year-long transition period). This is expected to cause additional headaches for advisors and insolvency practitioners whenever new directors are appointed to implement turnaround plans or oversee trading, including in connection with an administration, CVA, or as part of a wider restructuring. From spring 2026, further changes to be implemented under ECCTA will mean that all filings at Companies House can only be made by an identified person or a registered ‘authorised corporate services provider’, introducing an additional administrative hurdle as insolvency practitioners will need to ensure that they, or their firms, have completed the necessary processes.

7. Beyond the headlines - other things to look out for

And finally, Partner Matthew Padian notes that it is worth keeping out for the following as 2026 progresses:

• Possible changes to the Insolvency Rules: some have argued that these are due a refresh. R3, for example, has recommended the introduction of a statutory fee for liquidators of a CVL. Watch this space.
• Two forthcoming judicial appeals: the Servis-Terminal v Drelle case is due to come before the Supreme Court after the Court of Appeal ruled previously that an unrecognised foreign judgment cannot form the basis of an English bankruptcy petition (find our article on the Court of Appeal decision here). An appeal is also expected in the Novalpina case, where the High Court previously held that companies in MVL must be able to pay all debts within 12 months or convert into a CVL.
• Increased scrutiny of director behaviour: neither the BHS case and the introduction of the concept of misfeasance trading (find our articles on the BHS case here and here), nor the reports around the misuse of Covid loans have resulted in as many claims against directors as previously forecast. But with the Insolvency Service receiving more funding to pursue rogue directors and greater powers under ECCTA, and HMRC also adopting a stricter approach to enforcement, we can expect the actions of directors to come under closer investigation this year.
• Business rates revaluation: these are anticipated in April this year. Some businesses already faced with tight margins might face significant increases which could tip them over the edge. 

Thank you for taking the time to read our outlook for 2026. We wish you a very happy and prosperous year ahead. Please do get in touch with me or any of the team mentioned above if we can assist at any stage.