Company insolvencies rise by 10% in a year

Company insolvencies across England and Wales were up 10% between 1 July and 30 September 2023 compared to the same period last year, according to official statistics.

The Insolvency Service reported 6,208 registered company insolvencies in Q3 2023 from 5,635 in Q3 2022, comprising 4,965 creditors’ voluntary liquidations (CVLs), 735 compulsory liquidations, 466 administrations, 41 company voluntary arrangements (CVAs) and one receivership appointment.

The Q3 2023 figure was 2% lower than the previous quarter with 6,319 company insolvencies. The last two quarters saw the highest quarterly insolvency numbers since Q2 2009 and the highest numbers of CVLs since records began in 1960.

Jonathan Andrew, Global CEO of Bibby Financial Services said, “Today’s insolvency figures clearly indicate that the combination of high interest rates, inflation and market uncertainty is undoubtedly beginning to bite. The cost-of-doing-business crisis is a very real threat to the UK’s economic recovery and, in particular, the UK’s SME community.

“The construction, hospitality and retail sectors have been the first to feel the pinch, but the full picture of SMEs’ viability will become clearer after Christmas. By then, we could be staring down the barrel of a gun for insolvencies. Without further support from both the private and public sectors, it’s possible we could see insolvencies exceed the last financial crisis.”

Christina Fitzgerald (pictured), Immediate Past President of R3, the UK’s insolvency and restructuring trade body, commented, “A perfect storm of economic issues has led to the highest Q3 corporate insolvency figures in more than two decades. A combination of rising costs, director fatigue and increased creditor pressure mean more firms are turning to a corporate insolvency process to resolve their financial issues.

“The key driver of the numbers is the rise in CVLs, which have reached their second highest figure on record and the highest number ever recorded in Q3. After years of battling through the pandemic, supply chain issues, increasing costs, rising inflation and requests for higher wages, many directors have simply had enough and are calling it a day while that choice is still theirs.

“Compulsory liquidation numbers have reached a four year high – partly because of legislation preventing them and then making the winding-up petition threshold higher in the aftermath of the pandemic, but also because these firms are now under their own pressures, and are calling in debts in the hope of balancing their own books.

“Trading conditions are tough right now. People are worried about money and reluctant to spend on anything other than the basics – and even then, are looking for the best deal possible – while costs are rising and the economy remains turbulent.

“The Christmas period is a crucial time for a large number of firms – and this year could be make or break for many, especially those in retail and hospitality. It remains to be seen whether this year’s Christmas trading period will be the shot in the arm or the final blow for those that are struggling, and we may see a surge in insolvencies in the New Year if it’s the latter.”