The IFT Quarterly Update Q1 2026: stubborn levels of distress persist, as businesses struggle with impact of conflict in the Middle East; spike in turnaround activity in financial services

The IFT Quarterly Snapshot: Company Turnaround in the UK

Published May 2026, covering Q1 2026

This quarterly update from The Institute for Turnaround covers turnaround and restructuring activity, as well as levels of company distress and key business pressures. The update includes an analysis of company data provided by FRP Advisory[1] and information from a survey of IFT partners.

Headline summary

IFT survey data showed a mixed picture for turnaround and restructuring activity in Q1 2026, though with sustained levels of activity:  67% of survey respondents were busier in Q1 2026 than in Q4 2025, with the rest seeing about the same level of activity.[2]

The busiest sector for IFT partners in terms of turnaround and restructuring activity in Q1 2026 was Financial Services, with 83% of respondents reporting high levels of activity. This was followed by Real Estate, which was noted as busy by half of respondents. Casual dining, construction, retail, and technology ranked joint third, each cited by a third of respondents.

Top themes or reasons for business distress in Q1 2026 cited by IFT partners were jointly  inflationary pressures, energy prices and depletion of working capital (cited by 67%[3]). These likely reflect the impacts of the conflict in the Middle East, with half of respondents separately commenting on the macroeconomic impacts of the Iran war, including “stagflation”, fuel inflation and supply chain issues.

Context

According to FRP Advisory data, across all regions in Q1 2026 there were 5,279 insolvencies. This is a 13% decrease from the Q4 2025 figure (6030) and a 15% decrease from the Q3 2025 figure (6188).

The total number of companies in distress in 2026 Q1 was 186,839, this is a slight increase of 1% from Q4 2025 (185,940) and broadly reflects the trends over the past two quarters.

Insolvency Service Statistics for March 2026, (after seasonal adjustment) showed the number of registered company insolvencies in England and Wales was 2,022, 7% higher than in February 2026 (1,895), and similar levels to March 2025 (1,995).[4]

Where is distress focussed?

From FRP data, construction continued to be the sector with the highest number of insolvencies for Q1 2026, the same as the previous quarter. This was followed by  accommodation and food service activities and administration and support service activities .[5] Again, the same two sectors, from Q4 2025, construction and professional, scientific and technical activities, continued to experience the most companies in distress in Q1 2026. However, real estate activities replaced retail and repairs as the sector with the third-highest number of companies in distress.

Regionally, the North West continued to see the highest number of insolvencies for Q1 2026, the same as in Q4 2025.  while the South East again reported the highest number of companies in distress.

Demand for turnaround expertise

Two thirds (67%) of IFT firms reported an increase in turnaround and restructuring activity in Q1 2026. Strong demand in financial services and real estate may indicate that higher financing costs, persistent inflationary pressures and tighter working capital positions are continuing to affect businesses in asset-heavy and advisory-led sectors. For financial services in particular, a number of different factors may underly strong demand for turnaround and restructuring support in Q1 2026, including challenges with raising capital and valuations (particularly for smaller financial services firms), increased regulatory monitoring and new regulations e.g. on cryptocurrency and the ramifications of motor finance redress and some high profile private credit insolvencies.

At the same time, demand from consumer-facing sectors such as casual dining and retail points to the continued pressure on customer demand and margins, while activity in construction and technology reflects the combined impact of cost inflation, energy prices and disruption associated with geopolitical upheaval and changing market conditions.

Conclusion  

Q1 2026 presents a mixed picture for the UK turnaround landscape. While overall insolvencies fell compared with both Q4 and Q3 2025, the total number of companies in distress remained at similar levels, reflecting that underlying economic pressures have not eased, particularly in light of the conflict in the Middle East. We can see continuing uncertainty for businesses and difficulties across a range of sectors and factors in light of this. Continued macro-uncertainty and likely less strong UK growth than we saw in Q1 as we continue through 2026 will provide more challenges for the increasing numbers of UK businesses experiencing financial distress and may be reflected in later insolvency figures.

[1] Quarterly figures are provisional and are likely to be subject to revision in later quarters

[2] Due to rounding figures may not total 100% exactly.

[3] Percentages rounded to nearest full percentage.

[4] https://www.gov.uk/government/statistics/company-insolvencies-march-2026/commentary-company-insolvency-statistics-march-2026

[5] Including businesses involved in law, consultancy, architecture, engineering, research and veterinary activities.