Business insolvencies may be showing tentative signs of easing, but stubborn cost pressures and continuing difficulties across construction, retail and hospitality mean businesses are far from out of the woods.
The latest insolvency statistics show a reduction in the number of insolvencies between the first and second quarters of 2026, providing some welcome respite after an extended period of financial pressure on businesses.
The improvement offers some grounds for optimism, but the figures also highlight significant differences between sectors. Construction once again finds itself at the top of a league no industry wants to lead, with insolvency levels remaining stubbornly high.
For Wales, where construction supports significant employment, investment and economic activity, the continuing pressure on the sector is particularly important. There is at least some encouragement in the fact that the position is no longer worsening year-on-year, although current levels remain a cause for concern and any meaningful improvement is likely to take time.
Wholesale and retail businesses, together with accommodation and food service operators, also remain among the sectors experiencing significant financial pressure. Here the direction of travel is somewhat more encouraging, with insolvencies reducing year-on-year.
The figures come against a wider backdrop of operating costs that continue to squeeze margins across large parts of the economy. Businesses have had to absorb higher energy, wage, property and supply costs while simultaneously navigating inflation, geopolitical disruption and, particularly in consumer-facing sectors, weaker demand.
The cost of supplies remains a concern across almost every sector, creating particular difficulties for businesses with limited ability to pass increases on to customers. For firms already operating on tight margins, relatively small increases in overheads can quickly have a significant impact on cash flow and profitability.
Successive economic shocks have also had a cumulative effect on business resilience. Retail, hospitality and leisure businesses in particular have spent several years absorbing higher costs while navigating changes in consumer behaviour, energy prices, wage pressures and wider economic uncertainty.
This is increasingly focusing attention on the role government policy can play in reducing the fixed costs associated with running a business.
Measures designed to reduce business rates for pubs, clubs and live music venues provide some encouragement for struggling sectors, although questions remain around the wider structure of the business rates system and whether support is reaching the businesses facing the greatest pressure.
Property-intensive businesses can find themselves particularly exposed. For independent retailers, restaurants, hospitality operators and other service businesses, property costs and rates sit alongside wages, energy and supplies as substantial overheads that must be met before a business makes a profit.
The policy environment in Wales differs from England because business rates are devolved, but the underlying challenge is shared: how to prevent rising fixed costs from undermining otherwise viable businesses and discouraging future investment.
Attention will now increasingly turn towards the Autumn Budget and whether it can provide businesses with greater confidence over the economic and fiscal environment ahead.
