Business insolvencies decreased by 7.4% in September

21st October 2024

Latest figures from the Insolvency Service have shown that there were 1,973 business insolvencies in September a decrease of 7.4% when compared to August’s total of 1,943.

The business insolvencies consisted of 226 compulsory liquidations, 1,575 creditors’ voluntary liquidations (CVLs), 155 administrations and 17 company voluntary arrangements (CVAs).

CVLs accounted for 80% of all company insolvencies. The number of CVLs increased by 2% from August 2024 and was 9% lower compared to the same month last year (September 2023).

The number of seasonally adjusted compulsory liquidations in September 2024 was 18% lower than in August 2024 and 13% lower than in September 2023.

Whilst the number of administrations in September 2024 was 40% higher than in August 2024 and 19% higher than in September 2023 after seasonal adjustment. The number of CVAs was 55% higher in September 2024 than September 2023 but 15% lower than in August 2024. There were no receivership appointments in September 2024.

Tim Cooper, President of insolvency and restructuring trade body R3, and a Partner at Addleshaw Goddard LLP, said “Although corporate insolvencies have only risen by a small percentage compared to last month, the business climate remains difficult as firms face a multitude of issues including ongoing cost challenges, uncertainty around announcements in the Budget and the potential knock-on effects of the conflict in the Middle East.

“Firms are worried about the impact future tax rises could have on their bottom lines, and members are telling us that there’s an increased demand for advice and support around Member Voluntary Liquidations as directors look to take steps to reorganise their business and its finances ahead any potential tax changes in the Budget.

“The conflict in the Middle East will likely affect UK businesses. Increased instability in the region could disrupt trade routes and supply chains, affecting businesses that rely on imports or exports from the Middle East. Businesses will have to weigh up whether they pass any cost increase onto customers or absorb it themselves. This is particularly relevant for sectors like energy, manufacturing, and retail.

“In terms of the figures, the marginal monthly increase in corporate insolvencies is due to an increase in Creditors’ Voluntary Liquidations and Administrations, while the year-on-year reduction in numbers is due to a fall in Creditors’ Voluntary Liquidations and Compulsory Liquidations.

“These figures also show that Administration numbers have increased compared to last month and this time last year. This suggests directors are seeking early advice, which is something R3 has been campaigning for since 2020. Seeking early advice means there are more businesses that have the potential to be rescued via a sale out of Administration – the preferred outcome of an Administration process for members of the profession, who always seek to rescue a business wherever this is possible.

“If directors are proactive at seeking advice when the first signs of financial distress present themselves, we could see CVL numbers reduce in the medium-term and more businesses entering administration in the hope of being rescued through a sale.”

“Despite these issues, there has been some positive news for certain key sectors of the economy, with news of construction output increasing, retail sales volumes continuing to rise in August and consumers spending more in the hospitality sector last month. Firms in these sectors have had a challenging year and they will be hoping this is the prelude to a strong finish to 2024.”

Giuseppe Parla, Business Recovery Director at Menzies said “Corporate insolvency statistics continue to slow when compared to year-on-year figures. Whilst there was a 2% increase in corporate insolvencies compared to the month of August 2024, September 2024 is 7% lower than the prior year. The director-led process of a Creditors’ Voluntary Liquidation is the most common type of insolvency being utilised, which means that directors are taking action before a creditor does.

“These corporate statistics are a stark contrast to personal insolvencies, which are 44% higher than last year. This is primarily as a result of the new criteria introduced for Debt Relief Orders in June 2024.

“Having recently learnt that inflation fell to 1.7% in the year to September 2024, the lowest rate in three-and-a-half years in the UK, which means it is now below the Bank of England’s target of 2%. This could open the door for further interest rate cuts in November, a lifeline to some. Many will continue to wait on the outcome of the budget on 30 October before taking any further action, which means we could see a rise in insolvencies towards the end of the year.”

Oliver Collinge, Director at restructuring and insolvency firm PKF Littlejohn Advisory said “Many business owners remain concerned about soft customer demand, continuing cost pressures in some sectors, and the wider state of the economy. High interest rates also continue to be a problem, affecting the cost of existing borrowing, as well as access to funding. The budget will be a significant moment: a possible increase in Employers National Insurance contributions would be an unwelcome development for businesses that are already on the edge.

“With negligible growth (real GDP grew by 0.2% in the three months to August) we anticipate that insolvency numbers will remain high until the economic situation improves.”

Daniel Staunton, Senior Associate in the Restructuring & Insolvency team at Kingsley Napley said “Today’s monthly insolvency statistics for September 2024 show that there were 1,973 registered company insolvencies, 2% higher than September but 7% lower than September 2023 but still higher than levels both during and pre-pandemic.

“September 2024 saw: 226 compulsory liquidations, 1,575 CVLs, 155 administrations, 17 CVAs. These figures were largely in line with last month, with slight increases. CVLs continued to account for the majority of registered insolvencies at 80% (79% last month). CVL numbers were up 2% from August figures, compulsory liquidations were down 18% from August, administrations up 40% from August and CVAs down 15% from August.

“Overall the stats this month reveal a slight increase in total insolvencies or insolvency situations bucking the downward trend from last month but the total number of insolvencies remains consistent with figures seen in the last 12 months including in 2024 so far.

“Inflation surprisingly fell to 1.7% in September a 3.5 year low and under the BoE benchmark of 2%. Inflation was 2.2% in August for context. Yet despite falling inflation, the number of insolvencies increased slightly showing there is a not an immediate direct cause and effect link between the two. I predict that changes will begin to show in the October and possibly November with ISS figures dropping off. That said, the much anticipated Autumn Budget announcement causing lots of trepidation over potential tax hikes and other nasties for business may well be impacting the current levels of insolvencies as prudent businesses tighten purse strings temporarily. Also whilst one hopes we are not in store for the pandemonium of a “Trussonomics” style budget, there is, of course, the potential for the market’s reaction to Labour’s plan to have a profound effect on the insolvency figures towards the end of the year with sharp spikes in the aftermath.”