The latest ONS insolvency figures provide a valuable barometer for assessing economic resilience across industry sectors. While the overall rate of corporate insolvencies has remained fairly steady over a couple of years (at a high not seen since the financial crisis in 2008-9, albeit as a lower percentage of overall company numbers), we know anecdotally that many businesses are wrestling with high overheads and reduced consumer demand.
Supply chains are particularly vulnerable - one failure can have a domino effect, and often there is little or no prior warning. Contingency planning is more important than ever in the current economic climate. Food companies are in the top six sectors suffering the worst, with accommodation and food service activities (at 3,353, 14% of cases where the sector is captured).
It is commonly accepted that hospitality has suffered heavily in recent years and with non-domestic rates discounts coming to an end, wages and utilities continuing to rise and the end customer base itself being financially squeezed on all fronts reducing discretionary spend, things are likely to stay challenging for some time to come.
The UK’s food and beverage manufacturing industry is an essential yet increasingly exposed component of the supply chain. Rising costs, persistent inflationary pressures, interest rate drag, and supply chain disruption all continue to test margins across the sector.
Food and beverage manufacturers, despite longstanding resilience, are now contending with margin compression that is both structural and cyclical, reflecting sustained increases in wages, energy, logistics and raw materials. These trends echo wider concerns seen in other distressed sectors, such as hospitality and operational real estate.
Across the market, we are observing shorter cash runways, delayed filings, rising creditor pressure and greater reliance on overdrafts. Indicators identified in sector‑agnostic ‘red flag’ style datasets - such as CCJs, falling headcount and increased leverage - feature prominently in food manufacture as well. This pattern aligns with our experience advising clients: early‑stage distress signals are materialising sooner and more frequently, particularly for mid‑market operators supplying national distributors and retailers who are themselves negotiating tighter margins.
The intense cost environment is compounded by lagging pricing power. In many cases, manufacturers cannot fully pass on cost increases due to pressures exerted by large buyers. This mismatch between input inflation and achievable sale price continues to erode working capital. Meanwhile, geopolitical factors and energy volatility make forward planning difficult, leaving directors at risk of deteriorating solvency positions, including potential exposure to wrongful trading if decisive steps are not taken.
Options for distressed companies
Against this backdrop, the question becomes: what practical routes are available to companies in distress? The UK framework offers a spectrum of options - informal, statutory, and formal - allowing directors to intervene early and responsibly (and to protect their personal exposure).
At the informal end, independent business reviews and HMRC Time to Pay arrangements remain extremely valuable. Many companies also benefit from renegotiated banking covenants, supplier forbearance, and operational cost restructuring, all of which can stabilise liquidity while strategic alternatives are explored.
Statutory tools introduced under the Corporate Insolvency and Governance Act 2020 continue to be underused but are particularly well‑suited to this sector. The company moratorium can provide breathing space while a business seeks new investment or restructures key liabilities.
Similarly, the Part 26A Restructuring Plan allows cross-class cram-down (even of HMRC), enabling a company to impose a restructuring on dissenting creditor groups where appropriate. These can be powerful rescue tools for strategically significant manufacturers with viable core operations but unsustainable legacy debt. Restructuring plans remain expensive for SMEs but government is keen to expand the tool to make it more workable for smaller businesses.
If financial deterioration accelerates, formal insolvency processes -administration, pre-pack sales, CVAs, or liquidation - should be considered.
For food manufacturers, administration can preserve enterprise value by ensuring continuity of supply to customers; often the decisive factor in achieving a going‑concern sale. CVAs may also work where landlords, lenders and trade creditors see long‑term value in supporting a rebalanced cost structure but achieving HMRC approval can be challenging.
Relief in sight?
Looking ahead, query whether prospective interest rate cuts might relieve pressure, to which the answer is probably; partially, but not immediately. Rate reductions may ease borrowing costs, but they will not reverse entrenched inflationary pressure on labour, energy and materials.
For food and beverage manufacturers, meaningful relief will depend more on supply chain normalisation, stabilised commodity markets and restored pricing flexibility.
The message from the latest data, and from our long experience, is clear: directors should act early. Clear, independent advice, rapid triage of financial data, and timely engagement with creditors can often avert formal insolvency altogether. If it doesn’t, then even so, usually the earlier the engagement the better the outcome.
The industry needs clear explanations and practical options. The UK restructuring toolkit is well‑equipped to support viable businesses, but only if deployed before value erosion becomes irreversible.
