New data from Witan Solicitors reveals the current state of the financial services industry, suggesting that it’s not just construction companies that are struggling to stay afloat.
Witan’s insolvency solicitors analysed data from Companies House to find the number of new companies within the finance industry that were incorporated between January 2020 and December 2024 and compared that to the number that have gone into administration, liquidation, or are now dissolved. Read on to find out what the current failure rate is for new finance companies.
So, What Is The Business Mortality Rate in Finance?
In the last 5 years, a third (34%) of new finance companies have closed, with approximately 58,718 out of the 172,345 that opened either going into administration, liquidation or are now dissolved.
This represents a 5.6% rise compared to last year’s failure rate of 32.2%, with approximately 62,531 out of the 194,081 new firms not making it past the 5-year mark.
Witan also broke the data down by the nature of the business. The study revealed that banks remain the most challenging type of finance company to establish, with the business mortality rate rising from 69% to 72%. Central banking-related companies continued to rank second, with 69.3% of new firms closing their doors, up from 62.5% last year.
Interestingly, building societies jumped from fourth to third place, as their mortality rate surged from 57.3% to 68.3%, a significant 19% increase in the number of new firms struggling to stay afloat.
Meanwhile, companies involved in the administration of financial markets fell to fourth place at 67.8%, an 18% increase from last year’s 57.4% mortality rate. Fund management businesses rounded out the top five least successful financial services companies, with a 61.9% failure rate for the second consecutive year, up from 55.75%.
On the opposite end of the scale, Other Holding (16.5%) remained the most successful type of finance company to open, followed by Non-Life Reinsurance (23.22%), Life Insurance (23.23%) Other Activities Auxiliary to Insurance and Pension Funding (26.2%) and Construction Holding Companies (28.9%)
Our Thoughts
In response to the findings, Qarrar Somji, Director of Witan Solicitors, says:
“We’re seeing a rise in insolvencies across the board at the moment. While construction has been particularly hard hit, it’s important to remember that no industry is completely immune, and that includes finance.
“Younger and smaller finance firms are especially vulnerable. After all, they usually don’t have the same cash flow cushion or the brand recognition that established players benefit from. Plus, trust is crucial when you’re handling people’s money, and it can take a long time and a lot of investment to build.
“In this climate, spotting the signs of financial distress early is crucial. In some cases, businesses don’t realise how fragile the situation is until it’s too late to act. Once a company goes into insolvency, recovering money can be incredibly difficult.”
If you’re concerned about the future of your business, get in touchwith our insolvency solicitors.
To access the full dataset or arrange an interview with a spokesperson, please email lhoneghan@witansolicitors.co.uk.
