Insolvency is often presented as tidy housekeeping for a messy end. The reality for most unsecured creditors is starker. In a typical creditors’ voluntary liquidation (CVL), no money flows to any class of creditor in the majority of cases, while the median cost of the process exceeds what’s left in the pot. Fresh research for the Insolvency Service found 86% of sampled CVLs made no payments to creditors, with median costs running at 163% of the estate and median insolvency practitioner (IP) fees at 21% of realisations. That sets expectations for recoveries uncomfortably close to zero.

How we got here is structural. The Insolvency Act 1986 created a licensed, private profession to run cases, overseen not directly by the state but by recognised professional bodies, with the Insolvency Service in an oversight role. In practice, large accountancy firms have long dominated complex appointments. The Carillion collapse underlined this concentration: MPs highlighted how the Big Four earned fees on the way in and the way out, with Rachel Reeves saying they “make a killing… and then pocket millions tidying up when that advice fails.”

Follow the statutory waterfall and the order of payment tells its own story. Fixed‑charge lenders sit ahead of most, office‑holder costs are paid from the estate, and since 1 December 2020 HM Revenue & Customs has regained ‘secondary preferential’ status for certain taxes such as VAT and PAYE-moving ahead of floating‑charge holders and the general unsecureds. The prescribed part still carves out a slice from floating‑charge assets for unsecured creditors, but it rarely changes the overall picture on its own.

The state also charges to run the system. In compulsory liquidations a general fee is levied on the making of a winding‑up order-raised to £7,200 from 9 January 2025-and where the Official Receiver acts as liquidator, a 15% percentage fee applies to assets they realise. Those amounts come off the top before most creditors see anything.

Successive attempts to police IP fees have had mixed results. The Office of Fair Trading and Professor Elaine Kempson both found unsecured creditors struggle to control remuneration when a powerful secured creditor isn’t in the room, prompting 2015 rule changes that forced upfront fee estimates and clearer reporting. Helpful, yes, but the new CVL evidence shows the basic difficulty remains for dispersed trade creditors at the back of the queue.

For directors and suppliers looking for signs of a ‘rescue culture’, the headline numbers still tilt towards closure. In 2024, CVLs accounted for 79% of all company insolvencies in England and Wales, with administrations and CVAs making up a small minority. Monthly updates through 2025 show CVLs continuing to comprise about three‑quarters to four‑fifths of cases. That bias limits the chance of trading out and usually compresses recoveries for ordinary creditors.

Enforcement has sharpened too. In 2024–25 the Insolvency Service disqualified 1,036 directors, including 736 bans tied to Covid loan abuse, with an average ban length of around eight years. During the pandemic the government temporarily suspended wrongful trading liability to keep businesses going-an explicit acknowledgment that the usual deterrent can push directors to shut early-but those protections were time‑limited and have long expired.

Crypto now sits squarely inside insolvency and enforcement. The Economic Crime and Corporate Transparency Act 2023 introduced new powers to freeze, seize and even convert detained cryptoassets to cash before a forfeiture hearing, removing the need for an arrest in some cases. The Insolvency Service has hired a dedicated crypto specialist as cases involving digital assets surge, while English courts recognise crypto as property, enabling office‑holders to pursue and recover it for estates. For creditors, that means digital value can increasingly be traced and realised rather than lost to the ether.

Regulation is catching up on the payments side, too. The FCA’s 2025 consultation proposes rules for issuing qualifying stablecoins and safeguarding cryptoassets, while the Bank of England has set out a prudential regime for sterling stablecoins that could require UK subsidiarisation for systemic issuers and ring‑fenced backing assets held in gilts and at the Bank. In a failure scenario, that design aims to fund redemptions from segregated reserves rather than leave coin‑holders fighting as unsecured creditors.

What should directors and creditors take from this? First, model HMRC’s secondary preference carefully; the taxman often steps ahead of floating‑charge holders and unsecured suppliers. Second, assume fees-both statutory and professional-are paid before you. Push early for cost clarity, because once the cash is gone, options are few. If a business holds crypto, treat keys and exchange records like any other high‑risk asset: document access, custody and beneficial ownership so value isn’t stranded if the firm fails.

There have been incremental rebalances. The cap on the prescribed part rose from £600,000 to £800,000 in 2020, and the Digital Securities Sandbox that began in January 2024 should, over time, lower plumbing costs in capital markets. Neither change rewrites the basics of today’s insolvency distribution, but both show policymakers can move when the evidence is clear.

For Market Pulse UK readers, the takeaway is practical rather than theatrical. In most formal failures the predictable winners are the state, the office‑holders and secured creditors; unsecured recoveries are the exception, not the rule. The new crypto powers and proposed stablecoin regime may improve asset recoveries at the margin, but they won’t change the priority ladder. Plan on that basis-and challenge costs and conduct early, while there’s still cash to protect.