Corporate Liquidations

Lord Leong Excerpts

Tuesday 10th June 2025 Lords Chamber

[Lord Leigh of Hurley]

To ask His Majesty’s Government what assessment they have made of the reasons for the reported rise in corporate liquidations in the year to 31 March 2025.

[Lord in Waiting/Government Whip (Lord Leong) (Lab)]

My Lords, in the year to 31 March 2025, total corporate liquidations rose by 8%. This increase was driven by a 36% jump in solvent liquidations, while insolvent liquidations fell by 3%. The current corporation insolvency rate remains less than half what it was during the 2008-09 recession. Businesses go into liquidation for various reasons—tight cash flow, falling sales and loss of market share to online rivals—but no single factor dominates. Compulsory liquidations have increased mainly due to the increase in winding-up petitions from creditors, mainly from HMRC.

[Lord Leigh of Hurley (Con)]

The Minister is right: in fact, more than 2,000 businesses have faced winding-up petitions this year, the highest rate since 2012. Today, we learn that the number of payrolled employees has fallen by 274,000 over the past year, and most worryingly by 109,000 just this month past. The Institute of Chartered Accountants has predicted that eye-watering costs to business, particularly tax costs, will lead to more job losses. Does the Minister agree with me that as every single Labour Government have left office with unemployment higher than when—

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[Lord Leong (Lab)]

My Lords, of course these are disappointing figures, but six months after launching Get Britain Working we are seeing real results, with economic activity at a record high, half a million more people in jobs since we took office and real wages having grown more since July than at any other time in the last decade. It is also worth noting that the latest GDP figures tell a very different story, up 7% in Q1 of this year, showing the UK economy’s resilience and potential. These indicators suggest a labour market that remains robust and responsive, not one that is being held back.

[Baroness Kramer (LD)]

My Lords, does the Minister agree that what was worrying about the liquidation numbers in 2024 was the increase in compulsory liquidations? That came ahead of the NICs increases, so it is a real red flag. The businesses that I speak to are desperately depending on the industrial strategy to restore their prospects. Can the Minister assure the House that the IS will include a focus on small businesses, including opportunities for government procurement? Will the Government reverse their policy of demanding that SMEs cede ownership of their intellectual property if they enter into even a small government contract?

[Lord Leong (Lab)]

My Lords, I assure the noble Baroness that we will publish our industrial strategy very soon, and it will definitely cover SMEs. As I mentioned earlier, compulsory liquidation is not something new. Companies go bust. We have seen big companies fail. Failure is a reality of business. Even major firms such as Ted Baker, The Body Shop and Wilko have collapsed. We should be thinking about how to support these corporate failures. We must have a more robust system, whether it is the credit system that needs reforming or even British banks. We must incorporate the American culture. Yes, we have to address failures, but more important is how we get up, dust ourselves down and get on to the business market again.

[Lord Londesborough (CB)]

My Lords, does the Minister accept that some of these business closures, particularly for SMEs—where payroll is their largest expense—were triggered not only by the scheduled increase in NICs but by the steep hikes in the national minimum wage? As the noble Lord pointed out, this was demonstrated by the very disturbing falls in payrolled staff and vacancies reported by the ONS. The resulting squeeze on their cash flow may cause a further spike in the rate of liquidations through Q2 and Q3. How does this sit with the Government’s claim to have “restored economic stability”?

[Lord Leong (Lab)]

The noble Lord makes an interesting observation that I do not share. First, there is no empirical evidence to suggest that NICs or business rates changes are primary reasons for any of these closures in the UK. I can give examples of businesses that are doing very well. Let us look at the hospitality business. I just looked at the latest results for JD Wetherspoon, which had revenue of £2.2 billion and EBITDA of £19.28 million. Stonegate, one of the largest pub companies in the UK, had revenue of £1.75 billion and EBITDA of £394 million. These are not companies that are in trouble. The picture is mixed. Yes, we have some contraction in the business sector, but businesses are thriving. Do not listen to me. Listen to people such as the president of Blackstone, who this week said:

“I would give the UK Government a lot of credit for embracing business”.

[Lord Watts (Lab)]

My Lords, is it not the case that under the last Government we nearly had bankruptcy in the economy, we had very low levels of growth and we had poverty wages? Is it not time for them to have a period of silence?

[Lord Leong (Lab)]

I thank the noble Lord for that question. All I can say is that in my long years of business I have learned one thing. Turnover is vanity; profit is sanity. If companies keep chasing turnover without the support of working capital, they will be on the first and pretty fast step to failure.

[Lord Sharpe of Epsom (Con)]

My Lords, first, does the Minister accept that the spike in voluntary closures is directly linked to the Government’s decision to hike the entrepreneurs’ exit tax from 10% to 14%—soon to go up to 18%—as well as increases in capital gains tax, which are prompting many owners to race for the exit?

Separately, in answering a question earlier he relied heavily on GDP figures, which will be small comfort to those people who have lost their jobs, but I think I heard him say 7% growth. I do not think that is right—would he care to correct the record?

[Lord Leong (Lab)]

Apologies; it is 0.7% growth. I thank the noble Lord for that. At the end of the day, what is really important is that we have to support businesses, and the Government are supporting businesses. Capital gains tax is still the lowest in Europe. In the G7, only the US and Japan are lower than us. Frankly, most employers go into business to create businesses. Sometimes they exit business, and some of our tax reliefs are still better than those of many other countries in Europe.

[Baroness Bennett of Manor Castle (GP)]

My Lords, several of the corporate collapses that the Minister referred to earlier were associated with private equity ownership and high levels of debt. Moody’s reports that default rates have been twice as high for private equity-owned firms as for others. The Financial Times leading article on 6 June noted that, with exit activity from private equity funds slumping to a historically low level, some private equity firms

“are resorting to … risky … methods of generating liquidity”.

Are the Government concerned about private equity’s impact through these means on both the real economy and financial stability?

[Lord Leong (Lab)]

My Lords, private equity plays an important role in business support in this country. We have seen private equity companies that have acquired businesses and actually grown them as well. Yes, their track record is not great, but there is definitely a role for private equity in business in this country. Do not listen to the Government. Listen to people in the private equity business. Jamie Dimon said:

“I’ve always been a believer in the UK’s … strengths as a place to do business and there’s much to like about the new government’s pro-growth agenda”.


Yesterday, Nvidia CEO Jensen Huang argued that the UK was in the “Goldilocks” zone with great universities, a good start-up culture and the third-largest amount of investment in AI companies globally outside the US and China.

[Lord Browne of Ladyton (Lab)]

My Lords, is my noble friend aware that in the 2024-25 financial year, the Insolvency Service disqualified more than 1,000 company directors? Of those, a significant proportion—736—were banned for abusing the Covid-19 Bounce Back Loan Scheme. Additionally, there were 131 individuals subject to bankruptcy restriction orders, with 87 of them also linked to the misuse of Covid-19 loans. How many businesses had to wind up because of those facts?

[Lord Leong (Lab)]

I thank the noble Lord for that. Yes, those figures are quite high. It is right that the full force of the law should come down on company directors who are found to be trading insolvently. Basically, there are different forms of liquidation, from creditors’ voluntary liquidation to compulsory liquidation, which I mentioned earlier, which has increased mainly because of HMRC prosecution. HMRC, Companies House and insolvency practices target abuses such as tax evasion and this whole area of phoenixism with tougher enforcement, personal liability for directors and upfront tax demand. That should be the way.