In 86% of UK liquidations, no money at all is returned to creditors. This figure, drawn from government research, shows that when a business fails, the damage rarely stays exclusively within the company. Value is destroyed across creditors, employees, and local communities.
Liquidation processes consume what little remains, with average costs exceeding 160% of the assets’ value, leaving suppliers unpaid and lenders empty-handed. For many small creditors, even a single unpaid invoice can be devastating.
Business failure is rarely an isolated event. It creates a ripple effect, where unpaid debts, job losses, and disrupted projects spread far beyond the original collapse. Understanding this domino effect is critical for leaders, creditors, and policymakers who want to preserve value rather than watch it evaporate.
Understanding the Numbers
The Insolvency Service’s most recent study of liquidations confirmed that in the vast majority of cases (roughly 86%), unsecured creditors receive nothing. Even where distributions are made, they are often pennies in the pound. By the time a company reaches formal insolvency, assets are usually depleted, encumbered by secured lenders, or consumed by the costs of the insolvency process itself.
International comparisons highlight how damaging this pattern is. Across the Organisation for Economic Co-operation and Development (OECD) economies, average recovery rates are around 83 cents on the dollar where restructuring is used, but only 57 cents where liquidation dominates. In the UK, where 81% of insolvencies in 2024 were liquidations, the bias toward closure rather than rescue means outcomes for creditors are consistently poor.
The clear consequence is that creditors cannot assume that debts owed will ever be repaid once a company enters insolvency. In most cases, their claims vanish entirely.
The Domino Effect
Insolvency is contagious. Research by R3, the UK’s restructuring trade body, found that 26% of businesses have suffered financial damage from the collapse of a customer or supplier, with one in ten describing the impact as “very negative.”
The Carillion collapse in 2018 remains a striking example. At the point of liquidation, Carillion carried £7 billion in liabilities and owed around £800 million to 30,000 subcontractors. More than 3,000 direct employees lost their jobs, but the wider toll was even greater. An estimated 75,000 people in the supply chain were affected as projects halted and payments evaporated.
Carillion’s demise didn’t just hurt private firms. It forced the UK government to step in to safeguard hospitals, schools, and infrastructure projects Carillion had been running. The cost to taxpayers of keeping those services going exceeded £150 million, illustrating how the collapse of one large business can impose systemic costs.
Stakeholder Fallout
The ripple effects of collapse are not confined to creditors. Employees often lose not just their jobs but wages and benefits owed. Safety nets like the government’s redundancy payments service soften the blow but rarely cover everything.
The closure of British Home Stores (BHS) in 2016 showed how destructive this can be. More than 11,000 employees lost their jobs, while a £571 million pension deficit left thousands of retirees facing reduced benefits. The Pension Protection Fund had to step in, shifting costs onto other employers and schemes.
Other failures bring direct costs to the taxpayer. When Thomas Cook collapsed in 2019, it stranded 150,000 British holidaymakers abroad. The government organised an emergency repatriation at an estimated cost of £100 million. In each case, collapse triggered losses far beyond the immediate company.
Why Value Is Lost
The grim outcomes are not inevitable. They stem largely from the way businesses and stakeholders handle distress.
In the UK, the default route is liquidation. The most recent data shows that more than four out of five company insolvencies are liquidations, with far fewer using restructuring tools such as administrations or Company Voluntary Arrangements. This suggests that many companies wait too long to seek help, reaching insolvency only when assets are gone and recovery is impossible.
Directors often delay action out of denial or fear of stigma. The Insolvency Service data showed that by the time they act, the business is “grossly and irretrievably” insolvent. Creditors, meanwhile, may push for winding up petitions rather than supporting a turnaround.
Structural issues add to the problem. Since 2020, HMRC has held secondary preferential status for certain tax debts, meaning it is paid before many unsecured creditors. This reduces the incentive for other creditors to support rescue plans, making liquidation more likely.
The result is a culture where distress is managed too late and too destructively, ensuring poor outcomes for almost everyone involved.
Preserving Value
There is a better way. Rescue and restructuring processes consistently deliver higher recoveries for creditors and better protection for employees than liquidation. CVAs, administrations, and pre-pack sales can preserve jobs, contracts, and value that would otherwise vanish.
These mechanisms work best when intervention happens early. If directors, lenders, and suppliers face problems head on, they can often preserve a viable core of the business. Even partial rescues (selling divisions, renegotiating debts, or managing an orderly wind down) yield more than a fire sale liquidation.
Arx Nova’s model is built around this principle of value preservation. We intervene quickly, conducting rapid diagnostics and aligning stakeholders to stabilise operations before collapse is inevitable. By acting decisively across financial, operational, legal, and reputational dimensions, we create breathing space to explore rescue options.
The speed and integration of the response is the difference between destruction and preservation.
Closing Insight
A business failure is never just the end of one company. It spreads hardship to creditors, employees, communities, and sometimes taxpayers. The true cost of collapse is not just the company itself but the value it drags down with it.
The data is clear. In most UK liquidations, creditors receive nothing. But this is not inevitable. With early action and integrated crisis management, much of that value can be saved.
Who’s behind this post?
Joseph Mawdsley
Director & Co-Founder
Joseph Mawdsley is a senior project leader and governance specialist, and Co-Founder of Arx Nova. With extensive experience guiding complex organisations through change, Joseph focuses on operational control, strategic planning, and delivery under pressure. He helps businesses stabilise fast and move forward with structure and clarity.
