Business insolvencies increase 2%

Latest figures from the Insolvency Service have shown that the number of business insolvencies in England & Wales in December 2023 was 2,002, 2% higher than in the same month in the previous year (1,965 in December 2022). 

The business insolvencies consisted of 153 compulsory liquidations, 1,731 creditors’ voluntary liquidations (CVLs), 103 administrations and 15 company voluntary arrangements (CVAs). CVL numbers were higher than in December 2022, while compulsory liquidation and administration numbers were lower.

CVL numbers were higher (5% up) than in December 2022, while compulsory liquidation and administration numbers were lower by 18% and 8% respectively.

Nicky Fisher, President of R3, the UK’s insolvency and restructuring trade body said “The monthly fall in corporate insolvencies is due to a drop in Compulsory Liquidation, Creditors’ Voluntary Liquidation (CVL) and Administration numbers, while the year-on-year rise in corporate insolvency levels is driven by an increase in CVL numbers and a slight increase in Company Voluntary Arrangements, as the volume of businesses entering the other corporate insolvency processes fell compared to last December.

“The figures published today are the highest for December in four years and reflect the final month of a difficult year for businesses in England and Wales. December was tough for many firms as they faced additional expenses at a time when margins were already tight. These won’t have been helped by consumer spending slowing and rising energy costs.

“At the end of a tough year, these extra costs could have been the final blow for many businesses and may have led to their directors turning to an insolvency process to resolve their firm’s financial issues.”

Gareth Harris, Partner at RSM UK Restructuring Advisory,said “It is disappointing, but probably not surprising that insolvency levels remain high. The uptick in insolvencies demonstrates clearly how many businesses across many sectors are struggling financially and what a tough trading environment they are facing. However, its promising to see liquidations and administrations slowing.

“With continuing economic uncertainty and such low growth it looks like it will be a tough 2024 for many, and it could be the end of the year before we see any real reduction back towards more “normal” levels of monthly insolvencies.”

David Kelly, Head of Insolvency at PwC said “Although lower than previous months, the high number of insolvencies in December rounds up an extremely challenging year for business. There were just over 3,000 more insolvencies in 2023 compared to 2022, an increase of almost 14%, with approximately 98% of insolvencies being for companies with less than £1m annual turnover – demonstrating just how difficult the climate has been, especially for small businesses.

“Year on year, our analysis shows the retail and hospitality/leisure sectors have seen an 18% and 27.5% increase in insolvencies respectively – the hardest hit sectors alongside construction and business services. 

“While the aforementioned sectors are likely to continue to be the most affected, the tech sector is also coming under increasing pressure. In 2023 we saw there was an 8.4% increase in insolvencies in this particular sector. This may be due to the nature of the sector in being asset light and more reliant on funding – a difficult combination in an environment of higher interest rates and decreased risk appetite from lenders.

“Unfortunately, the picture for 2024 looks uncertain. Concerns remain around a sustained period of high interest rates, the impact the Gulf crisis is having on global shipping, supply lines and energy costs and the extent to which it will have a knock-on effect on inflation targets. The relief businesses hoped might arrive within the first half of this year may now be delayed in coming.”