Corporate insolvencies fall in May 2024

Corporate insolvency levels fell by 6.4% in May 2024, with personal insolvencies also dropping by 3.5% during the same period, according to new statistics from the Insolvency Service.

Corporate insolvencies decreased to a total of 2,006 compared to April’s total of 2,144 and dropped by 21.2% compared to May 2023’s figure of 2,547.

Personal insolvencies also fell by 3.5% in May 2024 to a total of 9,266 compared to April’s total of 9,605, and increased by 2.9% compared to May 2023’s figure of 9,003.

Tim Cooper, President of R3, the UK’s insolvency and restructuring trade body, and Partner at Addleshaw Goddard LLP, commented on the release of the May 2024 insolvency statistics for England and Wales: “The month-on-month fall in corporate insolvencies is driven by lower numbers of Administrations, Compulsory Liquidations and Creditors’ Voluntary Liquidations (CVLs), while the reduction in numbers we’ve seen compared to May 2023 is mainly driven by a fall in Administrations and CVLs. However, levels of corporate insolvency are still higher this month than they were in May 2019, and this is because CVL levels are higher – significantly higher – now than they were then, as a greater number of directors are closing their businesses after four tough years of trading during and post-pandemic.

“The business climate remains challenging due to a variety of short and long-term issues. Inflation levels, cautious consumer spending, and the costs of energy and fuel have been affecting businesses for months, while shorter-term issues like the rain we experienced in April and May will have hit firms in the construction, retail and hospitality sectors.

“Retail and hospitality will have seen a lower footfall as a result of the wet weather over the last couple of months, and this will have been another blow after a tough start to the year, a poor Christmas trading period and the longer-term impact of people spending less. However, these industries will be hopeful the Euros will bring an increase in footfall and spending in England and Scotland, which may help make up for a slow start to the year.

“The rain will have also caused delays and disruption to construction projects, which will create additional issues for a sector that had seen a reduction in new work at the end of last year and the start of this one.

“Another factor affecting businesses is the wait for the Monetary Policy Committee’s decision on the Bank Rate of interest as the impact this announcement has on everything from leasehold agreements to foreign exchange rates may have resulted on firms choosing to enter or choosing to delay entering an insolvency or restructuring process depending on the timings of their current arrangements. The Committee’s decision is also likely to affect businesses in the future, given the impact it has on a range of areas of commercial and international finance.  

“When it comes to trends in insolvency and restructuring over the next couple of months, I would expect the liquidation numbers to soften slightly, and mid-market businesses to look towards exploring their options for Restructuring Plans as the recent ruling on Tasty plc’s proposals will potentially open up the market for this process to firms of this size, but with low market expectation of an interest rate cut before the August Monetary Policy Committee sitting at the earliest, it could be a slow summer for restructurings. 

“Despite the challenges businesses face and the uncertain political and economic climate, they are generally more optimistic about the coming months, and many expect output and sales levels to rise and are planning to recruit extra staff. With the economy growing in the first quarter of this year and predicted to grow again in the next quarter, the tide may be about to turn for the better.”