The UK economy has entered the year on a subdued footing, and the consequences for trade credit insurance underwriters are becoming more pronounced.
Modest GDP growth in Q4 2024, persistently elevated inflation and prolonged disruption to global energy supply routes are sustaining financial stress across the corporate sector, with construction, retail, hospitality and professional services all carrying elevated insolvency risk as the year progresses.
The UK Monetary Policy Committee held the bank rate at 3.75% in March 2026, balancing economic support against the risk of renewed inflation. The prolonged closure of the Strait of Hormuz has added further pressure, with continued disruption to oil and gas shipments driving up energy costs and causing supply chain delays that are feeding directly through to claims costs across multiple lines of business.
UK company insolvencies reached 2,343 in May 2026, continuing a run of historically high monthly figures. Official data shows 2,085 registered companies filed for insolvency in April, a 2% increase on March 2026 and broadly in line with April 2025 levels. Monthly totals have fluctuated through the year, with January recording 1,749 filings and February 1,878, but the underlying level remains significantly above pre-pandemic norms.
Construction leads the sectoral insolvency table, followed by wholesale and retail trade and accommodation and food services, according to Insolvency Service data for the 12 months to March 2026. The forward-looking picture is more concerning still. Begbies Traynor's Red Flag Alert data for Q4 2025 recorded 67,369 companies in critical financial distress, a 43.8% increase year-on-year, with all 22 monitored sectors reporting deterioration. The firm warned that mounting cost pressures, weak consumer demand and HMRC's active recovery of pandemic-era tax arrears could push tens of thousands of zombie businesses into formal insolvency during 2026.
Begbies Traynor identified particular vulnerability in construction, hospitality and retail. Those sectors face compounding pressures from higher employer National Insurance contributions and minimum wage increases introduced in April 2025, elevated energy costs and reduced consumer discretionary spending. For hospitality operators, business rates changes brought more than 3,000 small pubs within the regime for the first time. FRP Advisory partner Allan Kelly described the April 2026 business rates revaluation as "a significant and often underestimated risk", warning some operators could face increases of up to 400% as rateable values reset.
Against this backdrop, the trade credit insurance market has maintained its underwriting appetite. Rates stabilised following prior-year declines, with carriers focused on portfolio quality rather than broad-based repricing. Both large corporates and SMEs have continued to access cover, with no material capacity withdrawal from the main providers. Trade credit insurance reached a record global exposure of approximately £3.07 trillion in 2024, with Morningstar DBRS reporting solid profitability and healthy combined operating ratios across the sector.
The three dominant carriers — Allianz Trade, Atradius and Coface, which collectively account for roughly 65% of global premium capacity — have all remained active in the UK market, supported by reinsurance buffers and underwriting discipline developed during the post-pandemic cycle. The UK trade credit insurance market generated revenue of approximately $734.8 million in 2025 and is forecast to grow at a compound annual growth rate of 11.7% through to 2033, driven in part by rising SME demand and greater awareness of debtor default risk.
The stability, however, is conditional. Morningstar DBRS expects insurers' overall credit profile to remain stable through the first half of 2026 but sees downside risks building towards year-end, when slower trade growth and rising corporate insolvency pressures could test underwriting resilience. The ratings agency cautioned that in a material economic downturn, reinsurance capacity could be rapidly restricted, transferring risk back to primary insurers at precisely the wrong moment.
Early warning indicators are already shifting. Although formal claims remained relatively subdued in Q1 2026, the volume of late payment notifications to insurers has been rising across several sectors, a pattern that historically precedes a claims uptick by two to three quarters. The market has responded with more granular, debtor-level rating action rather than the broad portfolio withdrawals seen during the COVID-19 period.
For brokers advising commercial clients, the current environment presents a relatively favourable point in the cycle for clients to secure or extend cover, particularly for businesses with supply chain exposure to construction, hospitality or retail. The adequacy of existing cover also warrants review: as carriers tighten limits on individual debtors, policyholders need to verify that covered amounts reflect current exposure and that notification protocols are being followed rigorously.
Atradius senior economist Theo Smid has warned that the global insolvency outlook has weakened further, with many businesses still carrying COVID-related tax liabilities while absorbing higher energy, labour and material costs.
For UK underwriters, those pressures are most acute in the sectors already topping the insolvency tables. Whether the gap between significant distress and formal failure widens or narrows in the second half of 2026 will depend largely on whether trading conditions stabilise or the next shock arrives before balance sheets have had time to recover.
