Business CVLs hit record high

Latest quarterly figures from the Insolvency Service for England & Wales have revealed the highest quarterly number of Creditors’ Voluntary Liquidations (CVLs) since the start of the time series in 1960, and a 14% increase in business failures in 2023 compared to 2022.

Between 1st October and 31st December 2023 (Q4 2023), there were 6,788 business insolvencies, comprising 5,578 creditors’ voluntary liquidations (CVLs), 780 compulsory liquidations, 379 administrations, 50 company voluntary arrangements (CVAs) and one receivership appointment.

The number of business insolvencies in Q4 2023 was 9% higher than in Q3 2023, and 14% higher than in Q4 2022. This quarter saw the highest quarterly total insolvencies since Q4 2008.  Administrations in Q4 2023 fell but still remained higher than levels seen throughout 2021 and 2022.

Creditors’ voluntary liquidations (CVLs) were the most common company insolvency procedure (82% of cases), followed by compulsory liquidations (11% of cases), administrations (6% of cases) and company voluntary arrangements (CVAs; 1% of cases). There was one receivership appointment.

Oliver Collinge, Director at restructuring and insolvency firm, PKF GM, says that Government support provided during the pandemic is now far behind us and high inflation and interest rates have created a tough environment for many businesses.

“Predictions of a tsunami of insolvencies are quickly becoming a reality among smaller businesses where CVLs are more typically used. There is no doubt that higher interest rates and continuing cost pressures have seriously impacted many UK businesses, with one in 186 active companies entering insolvent liquidation in 2023 – the highest rate seen since Q3 2014. We are certainly seeing an uptick not just in smaller companies but also in larger businesses seeking our support and there could be more painful news on the horizon.”

“An insolvency process is a serious and stressful step to contemplate. But if you take advice early, your range of options will be much greater, as will the chances of rescuing your business. If you are worried about your business and its ability to operate in the current economic climate: seek advice.”

Commenting on the figures, Derek Ryan, Managing Director of Bibby Financial Services  said “Another peak in company insolvencies is a worrying sign of more trouble ahead, with SMEs in the eye of the storm. Squeezed at both ends by record high interest rates and inflation, the UK’s small businesses are also struggling to find the finance they need, as traditional lenders are increasingly retreating from the market in all sectors. Our research found two-thirds (67%) say banks are less likely to lend to them today.

“But the impact of this extends beyond the SME community, threatening the economic growth of the UK as a whole. It’s critical that both public and private sectors work together to incentivise growth and rebuild business confidence.”