Insolvency Service has a busy year
The Insolvency Service has released its annual report showing stronger enforcement activity while improving support for people in debt.
Two key takeaways from the report were the increasing use of Artificial Intelligence to tackle abusive phoenixism and continued tackling of COVID-19 fraud.
Overall, the Insolvency Service returned £42.7 million to creditors and the wider economy in 2025-26. It handled 11,668 insolvency cases, processed 70,633 redundancy payments and approved 48,344 Debt Relief Orders.
Enforcement activity also increased with 1,153 directors disqualified for misconduct, an increase of 11%. There are 185 live company investigations, up 39% on the previous year, with 163 criminal prosecutions completed.
The report showed that the Insolvency Service continued to modernise its services, including progress on a new digital Debt Relief Order service, investment in artificial intelligence and automation to improve the customer experience and the rollout of a new case management system to help investigators work more efficiently.
The problem with COVID
In May 2025, the agency was tasked with taking over the recovery of funds lost to COVID-19 fraud. It reported that 65% of its civil and criminal enforcement outcomes related to it. The Insolvency Service admitted that it anticipated a decline in case volumes as the schemes receded, but activity has remained consistent with previous years, “… reflecting sustained investigative effort and a continuing pipeline of complex cases”.
During 2025 to 2026, there were 773 Section 6 director disqualification outcomes and 55 bankruptcy restrictions and debt relief restrictions linked to COVID-19 financial support scheme misconduct. In the same period, there were 31 criminal convictions resulting in 25 custodial sentences.
Unfortunately, only £4.5 million was recovered.
Abusive phoenixism
The agency also indicated that it had plans to do more to tackle the issue of abusive phoenixism – where directors repeatedly abuse the dissolution or insolvency process to avoid paying creditors or for fraud. This causes significant harm to creditors, honest businesses and public finances.
With an increased technology budget and a quickening rollout of Artificial Intelligence systems throughout the service, phoenixism is firmly within its sights.
It planned to spend an additional £25 million to fund 50 more staff with tech backup dedicated to director misconduct. Cross-government work includes strengthened data-sharing with HMRC and Companies House, using a combined threat assessment to catch dodgy directors.
In 2025-2026, it completed 148 civil investigations into companies where abusive phoenixism was identified and civil or criminal investigations were ongoing into a further 64 companies.
As a result of the abusive phoenix investigations, 18 companies were shut down for trading against the public interest, 87 directors were disqualified and five directors were convicted of criminal offences.
Key achievements in numbers
- £42.7 million returned to the economy through distributions to creditors and debtors.
- 1,153 directors disqualified for financial misconduct.
- 70,633 redundancy payments processed for employees affected by employer insolvency.
- 48,344 Debt Relief Orders approved, helping vulnerable people access debt relief.
- 80,542 Breathing Space protections granted to people struggling with debt.
- A £25 million government investment announced to strengthen action against abusive phoenixism and director misconduct.
- The Insolvency Service’s full report can be found here:
