Corporate insolvencies increase in April 2024

Corporate insolvency levels rose by 18.4 % in April 2024, with personal insolvencies also increasing by 9.9% during the same period, according to new statistics from the Insolvency Service.

Corporate insolvencies increased to a total of 2,177 compared to March’s total of 1,838, and increased by 18.4% compared to April 2023’s figure of 1,838.

Personal insolvencies also increased by 9.9% in April 2024 to a total of 9,651 compared to March’s total of 8,782, and increased by 4.7% compared to April 2023’s figure of 9,222.

Tim Cooper, President of R3, the UK’s insolvency and restructuring trade body, and Partner at Addleshaw Goddard LLP, commented on the publication of the April 2024 insolvency statistics: “The last year and the last quarter have seen corporate insolvency numbers reach a level not seen since the previous recession in 2008-09. The fact the UK had entered a recession (albeit relatively modest) during the last two quarters of 2023 was a contributing factor, however the recession would appear to have been short lived with a better than expected growth in GDP of 0.6% between January and March which has largely cancelled out the recession itself.

“Against this backdrop, inflation is falling and the Bank of England have held interest rates for a further month, with market speculation abundant as to whether and when a cut is on the cards. Corporate registrations are at a record high, so there are factors at play which suggest some return of business confidence, if not consumer confidence with cost-of-living pressures still playing their part. Working out what is going on is therefore becoming more nuanced than simply blaming the pandemic, cost of living, inflation and interest rates.

“The annual and monthly increases in corporate insolvencies shown in the figures published today have been driven by an increase in all types of corporate insolvency process, but the key areas which stand out are the increases in Creditors’ Voluntary Liquidations (CVLs) most of which relate to small and medium sized companies – the process which has seen the largest rise (after a brief decline in March) – and administrations.

“One factor in the increase in CVLs is likely to be down to directors closing their business at the end of the financial year – either because they believe the market won’t improve or because they’ve simply had enough after four tough years. Another possibility could be difficulties in small businesses in distress being able to access more complex and more expensive forms of restructuring, and having to resort to liquidation as a means of dealing with unserviceable debt.

“While the increase in administrations isn’t by a large number, it does suggest that there are an increasing volume of businesses that could potentially be rescued rather than wound-up and as the economy recovers we would anticipate this rise will continue. We will need to keep a close eye on this, as the trendline is upwards and the causes are not clear against a backdrop of an apparent increase in business confidence and the so-called ‘green shoots’ of economic recovery. One would expect liquidations to level out or decline, as rescue mechanisms begin to replace closures – but we shall have to wait and see.

“The sectoral data we have available shows that the construction, retail and hospitality sectors continue to experience the highest insolvencies this year so far. Retail and hospitality businesses have been especially affected by consumers’ wariness about spending money, poor weather in February and a tough pre-Christmas trading period. Issues with the weather will also have affected the construction industry, as will the fall in new work it has suffered from since the start of the year.

“Despite the difficult business climate over the period these figures cover, there is some cause for optimism. The economy is growing again and business and consumer confidence are both improving, and while businesses remain concerned about costs and consumer demand, the mood is generally more positive with a significant increase in new company registrations being reported by Companies House.”