What UK advisers are seeing and why early conversations matter
January is always a revealing month for SMEs. But early 2026 is exposing financial pressure earlier and more sharply than usual. Across the UK, advisers are seeing tightening cashflow, faster HMRC escalation and increased lender scrutiny often all at once.
Throughout 2025, company insolvencies remain high. Data from the The Insolvency Service shows insolvency levels remaining materially higher year on year, highlighting how little headroom many businesses are now operating with.
Late payments continued to undermine SME cashflow. Research published by the Office for National Statistics indicates that most UK businesses experienced payment delays, with smaller companies hit hardest. For many, overdue invoices represented a significant cash gap heading into the new year.
At Springfields Advisory LLP, early January enquiries are already reflecting these pressures. Advisers are telling us:
- “Cashflow looked fine in December, but tightened very quickly.”
- “HMRC escalated faster than expected.”
- “The bank wants updated forecasts before reviewing the overdraft.”
These are not isolated cases. They are part of a wider pattern.
The January cashflow cliff
January reliably creates pressure, but several overlapping factors are amplifying the squeeze this year:
- VAT liabilities falling due, often with arrears carried forward
- Self-assessment bills landing alongside seasonal trading dips
- Slower customer payments, with January collections typically lagging
- Higher financing costs following prolonged elevated interest rates
- Lenders reviewing overdrafts and informal facilities earlier
Each issue may be manageable in isolation. Combined, they create a sharp cashflow spike, even for well-run businesses.
Early warning signs advisers are spotting
Accountants, solicitors and bookkeepers often see stress signals before directors do. Common warning signs include:
- Delays in providing up-to-date financial information
- Directors using personal funds to cover short-term liabilities
- Several creditors becoming assertive at the same time
- Lenders requesting short-notice forecasts
- HMRC revisiting or declining time-to-pay arrangements
- Debtor days extending beyond 60 and remaining elevated
Many companies that entered insolvency during 2025 showed similar symptoms months earlier. The difference in outcome was often how early the issue was acknowledged.
HMRC’s early-year approach
HMRC adopted a firmer stance throughout 2025, and that approach continues into 2026. Guidance published by HM Revenue & Customs makes clear that time-to-pay arrangements are assessed on historic compliance, credibility of forecasts and speed of engagement.
In practice, this means:
- Less flexibility on older or repeated tax arrears
- Faster escalation from automated systems to field officers
- Increased requests for short-term cashflow forecasts
- Greater scrutiny of businesses with a pattern of late filings
A common misconception is that January attracts leniency. In reality, early engagement supported by realistic data consistently leads to better outcomes.
Why January is the right time for restructuring discussions
January offers a valuable window for constructive conversations:
- Suppliers expect early-year renegotiations
- Landlords are often more open before Q2 pressures arise
- Lenders are actively reviewing exposure
- Directors are more receptive to strategic change after year-end
Insights from UK Finance suggest lenders increasingly expect timely, transparent financial information during early-year reviews. Businesses that engage early are far more likely to retain facilities and avoid destabilising funding changes.
Much of our early-year work focuses on stabilising weekly cashflow, restoring visibility and rebuilding stakeholder confidence, often avoiding formal insolvency altogether.
Why early conversations lead to better outcomes
Across turnaround work during 2025, early intervention consistently produced stronger results:
- More jobs preserved
- Reduced exposure to personal guarantees
- Higher likelihood of returning to positive cashflow within six months
In almost every successful rescue, an adviser raised concerns at the first sign of stress, not the last.
A note for Accountants, Solicitors and Bookkeepers
Research published by the Federation of Small Businesses highlights how cashflow pressure and late payments affect director decision-making long before insolvency becomes inevitable.
If a client shows early signs of strain, a short confidential conversation can:
- Distinguish temporary pressure from structural issues
- Create immediate breathing space
- Reinforce your role as a trusted adviser
- Help directors act appropriately and reduce personal risk
For many businesses, the outcome is clarity and stabilisation, not insolvency.
Reference Links
UK Company Insolvency Statistics (England & Wales)
The Insolvency Service
https://www.gov.uk/government/statistics/company-insolvency-statistics
UK Business Conditions & Late Payment Data
Office for National Statistics (ONS)
https://www.ons.gov.uk/businessindustryandtrade
HMRC – Paying Tax Arrears & Time to Pay Guidance
HM Revenue & Customs
https://www.gov.uk/difficulties-paying-hmrc
SME Cashflow, Late Payments & Confidence Research
Federation of Small Businesses (FSB)
https://www.fsb.org.uk/resources-page/research-and-reports.htmlBusiness Lending & Banking Conditions
UK Finance
https://www.ukfinance.org.uk/policy-and-guidance/reports-and-publications
If you would like to know more please call 0116 299 4745 or email info@springfields-uk.com
