High street faces ‘Dry January’ as insolvencies climb

Stats released today by The Insolvency Service reveal that company insolvencies rose to 1,744 in January 2026, an increase of 4% compared to December 2025, adding to concerns that the UK economy experienced a “Dry January” as firms struggled to recover from the festive slowdown.

Businesses in the wholesale, retail and hospitality sectors accounted for 30% of all insolvencies in the year to January 2026, with 7,081 companies affected.

The figures underline mounting pressure on the UK high street, as subdued post-Christmas demand and persistent cost challenges weighed heavily at the start of the year.

Freddy Khalastchi, Restructuring & Insolvency Partner at Menzies LLP, warns that the pressures facing high street and leisure operators are now increasingly structural, rather than simply seasonal:

“Hospitality, retail and leisure businesses had hoped for a stronger start to the year, yet many continue to grapple with rising costs, subdued consumer spending and increasingly limited headroom within already thin operating margins.

Hospitality, leisure, property and construction businesses tend to feel the strain most acutely at this time of year, as winter weather and shorter daylight hours dampen activity and delay projects. Retailers, meanwhile, are often forced into heavy discounting to clear unsold Christmas stock, as fragile demand and persistent cost inflation further erode profitability.

The latest insolvency figures underline that these challenges extend well beyond a typical post-Christmas slowdown. Instead, they point to deeper pressures that continue to test the resilience of the UK’s consumer-facing sectors and require urgent policy attention.”

Khalastchi adds that while the recently announced pub rescue package offers some targeted relief, broader support remains limited, “Aside from limited relief for pubs – many of which have already closed their doors in recent years – there has been little meaningful government support for other struggling sectors. With food, drink and raw material costs still rising, the full impact of the increase in Employer’s National Insurance now being felt. This, coupled with another uplift in the National Minimum Wage, due within months, means that preserving working capital has now become critical.

For many businesses, survival will depend on holding their nerve until the spring, when expected interest rate cuts may help revive consumer spending and ease financial pressures. Those that act early and seek professional advice will retain the widest range of options – and the best chance of navigating what remains a highly challenging trading landscape.”