Business Insolvencies increase by 5%

Latest figures from the Insolvency Service have shown that the number of business insolvencies in England & Wales in January 2024 was 1,769, 5% higher than in the same month in the previous year (1,685 in January 2023). 

Of the 1,769 registered company insolvencies in January 2024, 1,294 CVLs, which is 6% lower than in January 2023, 339 were compulsory liquidations, which is 66% higher than January 2023. There were 120 administrations, which is 40% higher than January 2023, 16 were CVAs, which is 14% higher than in January 2023. There were no receivership appointments.

There were 339 compulsory liquidations in January 2024, up 66% year-on-year. The number of creditors’ voluntary liquidations (CVLs) was 1,294, administrations were at 120 and there were 16 company voluntary arrangements (CVAs) last month. CVL numbers were down 6% on January 2023, while administration and CVA numbers increased by 40% and 14% respectively.

Business insolvencies decreased by 11.8% in January 2024 to a total of 1,769 when compared to December 2023’s total of 2,005.

Nicky Fisher, President of R3, the UK’s insolvency and restructuring trade body said “January 2024 saw the highest corporate insolvency figures for the month of January in four years. Both compulsory liquidation and Creditors’ Voluntary Liquidation (CVL) levels were higher than in January 2019, which suggests that both creditor pressure and director fatigue are still above pre-pandemic levels.

“Levels of corporate insolvency were lower than in December due to a fall in the number of CVLs, but compulsory liquidations returned to their second highest level in four years. Creditors are clearly proactively pursuing the debts they are owed as we go into the final quarter of the financial year, and they look to balance their own books and pay their own debts.

“January was the sting in the tail of a hard year for businesses. The post-Christmas boost many were hoping for didn’t happen as people remained conscious of the costs of food, fuel and energy, and held back on spending on anything that wasn’t essential, while running costs for businesses remained high and margins remained thin.

“As a result, many firms who were struggling missed out on the lifeline or windfall they were hoping for from the Christmas trading period, and if the business climate doesn’t improve and the recession takes root, we may see corporate insolvency numbers increase further in future.”

Nick O’Reilly, former R3 President and Restructuring and Recovery Director at MHA said “Although the year has started with some positive numbers, as we head further into 2024, we are likely to see more large-scale administrations compared to 2022 and 2023, as the continued impact of high interest rates begins to bite even further. This year is likely to be the busiest 12 months for insolvencies since the early 1990s as similar challenging conditions to 2023 will prevail — ongoing macro-economic pressures, a flat housing market, still depressed levels of consumer confidence — combined with the lack of availability of interest payment holidays.

“Despite a strong set of January retail figures this morning which in effect compensated for a terrible set of numbers for December we are highly likely to see to some further high-profile casualties in that sector along the lines of the Body Shop earlier this week and Construction businesses are likewise particularly exposed.”

Gareth Harris, Partner at RSM UK Restructuring Advisory, said ‘The latest monthly insolvency statistics, whilst disappointing, do not come as any surprise against the backdrop of a confirmed recession and continuing high interest rates. Whilst the technical recession may have lasted six months, the last two years have in fact been very hard for many small and medium sized businesses, with low growth, supply chain issues and high inflation leading to insolvency levels over that period about 38% above long-term averages.

‘What is clear is that the legacy of Covid is not behind us, as flat growth, high interest rates and leveraged balance sheets start to impact larger businesses. However, there are some glimmers of hope, as we continue to see appetite in the market from investors and lenders to provide lifelines, and we are still able to drive solutions quickly with assistance from key stakeholders. In addition, some of the underlying economic trends, such as employment levels and real income levels are rising.’

Daniel Staunton, Senior Associate in the Restructuring & Insolvency team at Kingsley Napley said “Today’s monthly insolvency statistics for January 2024 show that there were 1,769 registered company insolvencies, 5% higher than January 2023. Once again higher than pre-pandemic levels.

 “January 2024 saw: 339 compulsory liquidations (66% higher than January 2023), 1,294 CVLs (6% down from January 2023), 120 administrations (40% higher than January 2023), 16 CVAs (14% higher than January 2023).

“This week alone saw news reports on two big topics that affect insolvency: (1) inflation levels reported to have remained at 4% (but still 100% above target levels of 2%) and (2) the UK economy is now deemed to be in a technical recession. This is a clear warning sign that corporate and individual insolvencies will continue to rise over the next few months. We may also see inflation start to creep back up and the Bank of England forced to act on the base rate. 

“It is interesting to see a sharp decline in CVL numbers, 1294 this month down from 1730 in December 2023 but this may just be a temporary lull rather than an early sign of a trend. I expect CVLs will jump back up albeit gradually next month and beyond. 

“The startling increase in compulsory liquidations, up 66% and the 31% increase in creditor bankruptcy applications is indicative that the culture of creditor abeyance is disappearing which, of course, was Government imposed for so long. 

 “Finally, the data for January 2024 is not yet available sector by sector but we can expect the numbers to be consistent with December 2023 data which shows that the worse hit sectors continue to be Retail, Hospitality and Construction.”