Corporate insolvencies rise in June 2024

Corporate insolvency levels increased by 15.7% in June 2024, with personal insolvencies also rising by 10.7% during the same period, according to new statistics from the Insolvency Service.

Corporate insolvencies increased to a total of 2,361 compared to May’s total of 2,040 and increased by 17.1% compared to June 2023’s figure of 2,016.

Personal insolvencies increased by 10.7% in June 2024 to a total of 10,395 compared to May’s total of 9,394, and increased by 32.9% compared to June 2023’s figure of 7,819. 

In response to this increase, Jonathan Andrew, CEO of Bibby Financial Services, commented on what the latest statistics mean for UK SMEs and what they need to see from the new Government: “Despite confidence emerging in some sectors, June’s insolvency figures reflect a challenging economic environment that continues to put UK businesses under genuine strain. For SMEs in particular, we can see a clear divide between those businesses able to weather the challenges of recent years, and those who are being pushed to the brink by supply chain disruption, late payment, and bad debt.

“While there’s no silver bullet to fix this, it’s critical that viable SMEs don’t fall through the cracks as things begin to stabilise. Access to finance for SMEs is a particular area that requires attention from the new Government. A starting point should be to reform and strengthen the underused Bank Referral Scheme. Critically, this will enable SMEs to access a wider array of financing options to help them to overcome challenges associated with cashflow pressures due to late payment or protracted default.”

Tom Russell, Vice President of R3, the UK’s insolvency and restructuring trade body, commented on the publication of the June 2024 insolvency statistics: “The monthly and yearly increase in corporate insolvencies is driven by an increase in Creditors’ Voluntary Liquidations – a process usually used by smaller businesses, and which is often driven by cashflow problems or difficulties with access to finance. Compulsory liquidation numbers have also risen to their second-highest level since January 2021 and suggests that creditors are taking a much tougher stance this financial year.

“But there are some positive signs in today’s figures – Company Voluntary Arrangement and Administration numbers have increased compared to last month, and Administration numbers are higher than this time last year and in June 2019. The profession will always try to rescue businesses wherever it possibly can, and this trend suggests that there are an increasing number of businesses for whom this is an option and whose secured creditors are willing to support rescue proposals.

“The reality is that businesses are still trading amidst high costs and cautious consumer spending, and despite recent more encouraging economic data pointing to increasing economic growth and falling inflation, the trading environment is still challenging for many businesses, and it seems that the economic improvement has come too late for some. 

“While retail sales rebounded in May, they are still down year-on-year, and restaurant spending fell again last month as consumers continued to be cautious with discretionary spending to save money. These sectors have struggled since the start of the year and have yet to bounce back from a disappointing pre-Christmas trading period, so we may see insolvency numbers increase in the Autumn if trading conditions don’t improve.  

“There was positive news for the construction sector, which saw growth in May after a disappointing start to 2024 and a delay in new work at the end of last year. While the uncertainty the General Election will have brought this sector is likely to impact firms and output in the short-term, the new Government’s pledges to invest in infrastructure and encourage housebuilding could reinvigorate two key markets for this industry if they come to fruition.

“The statistics show that levels of CVLs have been high for some time now – CVLs are typically the insolvency procedure used by SMEs. The new Government has committed to a number of new policies during the General Election campaign which are designed to boost the business community – especially SMEs.

“Their pledge to reform business rates to be fairer may benefit businesses in the retail and hospitality sector, while plans to introduce legislation to tackle late payments, if effective, will improve cashflow for businesses and free up resources that will potentially allow firms to focus on investment and growth instead of chasing money they are owed and managing cashflow. These measures will take time to introduce and may come too late to help those who are currently struggling.

“It’s also worth noting that many businesses continue to be optimistic about the future, with lower inflation and the prospect of higher sales and profits boosting their confidence about the coming months, but we’ve yet to see the full impact of the General Election on the economy and purchasing decisions, and despite their optimism about the future, organisations remain concerned about customer demand, staff turnover and meeting their regulatory requirements.”