20th June 2026
Every month, the headlines tell us how many businesses have gone into liquidation, administration or other forms of insolvency.
The numbers matter.
But they tell only part of the story.
Behind every insolvency is a business that once employed people, paid taxes, served customers and contributed to its local community.
The more important question is not simply how many businesses are failing.
It is why they are failing.
The answer is more complex than many people realise.
The Economic Environment Has Changed Dramatically
Businesses have always faced competition and occasional economic downturns.
However, the past fifteen years have brought a series of challenges that few business owners could have anticipated.
These include:
the aftermath of the global financial crisis;
Brexit and changes to trading arrangements;
the COVID-19 pandemic;
supply chain disruptions;
the energy price shock following Russia's invasion of Ukraine;
the highest inflation in decades;
rapidly rising interest rates; and
changing consumer habits.
Many firms have had to cope with several of these pressures at the same time.
Higher Costs on Almost Every Front
One of the biggest challenges has been the rising cost of doing business.
Employers have faced increases in:
wages;
National Insurance contributions;
pension costs;
insurance premiums;
energy bills;
borrowing costs;
rent and property costs; and
the price of raw materials.
Many businesses have been unable to pass all of these increases on to customers.
As a result, profit margins have been squeezed.
Consumers Have Changed Too
Businesses are not operating in the same marketplace they knew ten or fifteen years ago.
Consumers now:
shop online more frequently;
compare prices instantly;
expect faster delivery;
spend more cautiously during periods of economic uncertainty; and
increasingly purchase services digitally.
These changes have transformed retailing, hospitality and many other sectors.
Some businesses have adapted successfully.
Others have struggled to keep pace.
Borrowing Became Much More Expensive
For more than a decade after the financial crisis, businesses became used to exceptionally low interest rates.
Borrowing to expand, invest or manage cash flow was relatively inexpensive.
That changed rapidly when central banks raised interest rates to tackle inflation.
Companies with large loans suddenly found themselves paying much higher interest costs.
For some, that proved to be the tipping point.
Labour Shortages Continue
Many businesses report that recruiting staff has become more difficult.
Some sectors also face rising wage costs because employers must compete harder to attract and retain workers.
This has been particularly noticeable in:
hospitality;
social care;
construction;
agriculture; and
transport.
Higher labour costs can be especially difficult for businesses operating on narrow profit margins.
Is It Just the Economy?
Economic conditions explain much—but not everything.
Some businesses fail because:
they invest too heavily;
cash flow is poorly managed;
they rely on a small number of customers;
technology changes their market;
competitors innovate more quickly; or
management fails to adapt.
No economy can eliminate business failure altogether.
Some degree of business turnover is part of a healthy market economy.
Administration Does Not Always Mean Failure
One point is often overlooked.
Administration and liquidation are not the same.
Administration is intended to give a business a chance to survive by restructuring, finding new investment or selling the company as a going concern.
Liquidation usually means trading has ended and the company's assets are being sold to repay creditors.
That distinction is important because not every company entering insolvency disappears.
Some emerge stronger after restructuring.
Scotland's Particular Challenges
Scotland shares many of the same pressures affecting businesses across the UK, but there are additional factors in some regions.
These include:
rural transport costs;
higher logistics costs for remote communities;
dependence on sectors such as tourism, food and drink, fishing and energy;
demographic change in some areas; and
difficulties recruiting skilled workers.
For businesses in the Highlands and Islands, simply reaching customers can cost more than elsewhere in Britain.
That makes resilience even more important.
Could Artificial Intelligence Change the Picture?
Looking ahead, another major change is already beginning.
Artificial intelligence could reduce administrative costs, improve customer service and help smaller firms compete more effectively.
At the same time, it may require businesses to invest in new technology and new skills.
As with previous technological revolutions, there will probably be both winners and losers.
What Should We Be Measuring?
Perhaps we place too much emphasis on counting failures.
It would also be useful to know:
How many businesses survive beyond five years?
How many grow into larger employers?
Which sectors are creating the most sustainable jobs?
Which government policies genuinely help businesses become more resilient?
Those questions tell us more about the health of the economy than insolvency figures alone.
Business insolvencies remain higher than many would like, but they are only one indicator of economic health.
The real challenge is creating an environment in which viable businesses can invest, employ people and grow with confidence.
That requires more than low inflation or lower interest rates.
It also depends on stable policy, access to skilled workers, modern infrastructure and confidence that the future is worth investing in.
If those conditions improve, today's insolvency figures may begin to fall.
If they do not, many businesses will continue to operate under intense financial pressure.
Food for Thought
Every business that closes leaves a gap.
Sometimes another firm quickly takes its place.
Sometimes a shop remains empty, a factory falls silent or skilled workers move elsewhere.
Perhaps the question we should ask is not simply:
"How many businesses failed this month?"
Instead, we should ask:
"What kind of economic environment are we creating for the businesses that are trying to succeed?"