Credit Focus – Edition 3: Navigating the UK Economy, Insolvencies, and Insurance Market Trends

The S&P UK Construction Purchasing Managers’ Index (PMI), a monthly survey to 150 firms reporting and tracking growth in the sector, showed activity declined for the eighth consecutive month in August at 45.5, albeit showed a slight recovery compared to July (44.3)⁶. Companies have attributed this decline to a lack of new projects, challenging market conditions, intense price competition and economic headwinds⁷.

The results showed reductions in housing and civil engineering work, while a degree of resilience was reported for commercial construction activity⁶. In August, respondents referenced hiring freezes, with mitigating rising payroll costs by cutting back on recruitment noted by many businesses.

S&P results showed a decrease in optimism across the sector with 34% of surveyed firms expecting an upturn in output in the year ahead, compared to 37% in July. There are positive signals on the supply side, with shortened vendor delivery times, improved subcontractor availability and purchasing price inflation hitting a 10-month low. However, easing supply conditions mostly reflected subdued demand and a lack of new projects⁶.

UK Company Insolvency Figures — By Industry⁴

The manufacturing sector is currently experiencing a downturn, with recent data showing a contraction in activity. According to the S&P Global UK Manufacturing Purchasing Managers' Index (PMI), the sector's health was at 47.0 in August 2025, marking the eleventh consecutive month of contraction and the sharpest decline in three months⁸. This message is mirrored by data from the Office for National Statistics (ONS), which reported that manufacturing output fell by 1.3% in July 2025, affecting nine of the 13 manufacturing subsectors⁹. The fall is largely attributed to subdued client demand, with both domestic and overseas demand slumping, and higher costs for raw materials and labour, combined with the ongoing economic uncertainty.

Despite the current challenges, there are some signs of resilience and cautious optimism for the future. Manufacturers remain persistently positive in their expectations about the business environment and wider economic conditions¹⁰. Additionally, some specific subsectors, such as aerospace and pharmaceuticals, have shown growth, demonstrating areas of strength within the broader manufacturing landscape.

UK Company Insolvency Figures — By Industry⁴

The UK retail sector is showing signs of a mixed performance, with the latest data available indicating that retail sales increased in August, with total sales up 3.1% year-on-year, attributed to a combination of warm weather and a recent interest rate cut by the Bank of England. Food and drink sales saw a significant boost of 4.7%¹¹, although this was largely driven by rising prices rather than an increase in the volume of goods bought. Non-food sales also saw a third consecutive month of growth, rising 1.8%¹¹, with particular strength in areas like computing and gaming as well as home goods, contributing to what has been described as a "solid summer of sales."

Despite this recent positive momentum, retailers are approaching the crucial "golden quarter" (the three-month period leading up to Christmas) with caution¹². Consumer confidence has been falling, and there are anxieties about potential tax rises and general financial pressures, including rising energy bills and a tick upward in unemployment. The British Retail Consortium (BRC) has voiced concerns that speculation surrounding a budget announcement in late November could dampen consumer spending during this key trading period¹¹. Overall, while sales are currently on an upward trajectory, the outlook is one of guarded optimism, with retailers and consumers feeling the strain of ongoing economic uncertainty.

UK Company Insolvency Figures — By Industry⁴

The hospitality sector continues to be impacted by high operating costs, including rising energy bills, food prices, and, most critically, labour costs. The increase in the National Minimum Wage and employer National Insurance Contributions has placed pressure on many businesses, leading to a record number of job losses in the sector¹³. According to UK Hospitality, the industry has seen a substantial number of job cuts since late 2024, accounting for a significant portion of all job losses in the UK¹⁴. This has been a major factor in reducing profitability, with many businesses resorting to cutting staff and limiting operating hours to stay afloat.

Consumer spending patterns remain cautious, and whilst some are still visiting pubs and restaurants, many are seeking out special offers and dining at cheaper venues to manage their budgets. This has led to a mixed performance in sales, with some reports indicating that like-for-like sales have struggled to keep pace with inflation¹⁵.

There has been encouraging signs within the domestic tourism market over the summer which has been supported by a busy calendar of music and sporting events. This has helped drive accommodation demand in several cities during a period typically quieter for corporate travel¹⁶.

The outlook for the sector remains cautious, but with small glimmers of optimism as tourism levels increase as we head towards the end of the year, and a key focus on innovation and adaptation to navigate the pressures of high operating costs and an apprehensive consumer base.

UK Company Insolvency Figures — By Industry⁴