Business insolvencies increase by 6%

Latest figures from the Insolvency Service have shown that the number of business insolvencies in England & Wales in November 2023 increased by 6.4% in November 2023 to a total of 2,466 compared to October’s total of 2,317, and increased by 21.4% compared to November 2022’s figure of 2,032.

Business insolvencies increased by 47.1% from November 2021’s total of 1,676 and by 63.9% compared to pre-pandemic levels in November 2019 (1,505).

The number of registered company insolvencies in November 2023 was 2,466, 21% higher than in the same month in the previous year (2,032 in November 2022). This was higher than levels seen while the Government support measures were in place in response to the coronavirus (Covid-19) pandemic and also higher than pre-pandemic numbers.

Busines insolvencies consisted of 359 compulsory liquidations, 1,962 creditors’ voluntary liquidations (CVLs), 133 administrations and 12 company voluntary arrangements (CVAs). The increase in business insolvencies compared to November 2022 was driven by CVLs and compulsory liquidation numbers, while administration numbers remained similar to November 2022 at slightly less than 2019 levels.

Of the 2,466 registered company insolvencies, 1,962 were CVLs, which is 23% higher than in November 2022. 359 were compulsory liquidations, which is 22% higher than November 2022. There were 133 administrations, which is 1% lower than November 2022 and 12 were CVAs, which is 20% higher than in November 2022

Nicky Fisher, President of R3, the UK’s insolvency and restructuring trade body said “The monthly and year-on-year rise in corporate insolvency levels is driven by an increase in Creditors’ Voluntary Liquidations and Compulsory Liquidations, as more directors choose to close down their businesses while that choice is still theirs and more creditors are pursuing debts they are owed as they attempt to balance their own books.”

“But the figures published today also take 2023’s corporate insolvency figures to the highest annual total since 2009. The fact that corporate insolvency numbers have reached a 14-year high is partly because of the covid hangover, which was a result of insolvency numbers being supressed by Government support measures, but also as a result of a relay of economic issues that have taken their toll on businesses.”

“Since the spring of 2020, firms have had to contend with the pandemic, the end of the Government support measures, rising inflation, the cost of living crisis, and supply chain issues – with no time to draw breath or recover in between them.”

“The past year has been especially tough. Costs have increased, people have been reluctant to spend money as they worry about paying for the basics, and high interest rates have made paying debts or securing funding incredibly difficult.”

“This point of the year is a critical time for many businesses, and if it doesn’t deliver the rise in revenues many are hoping for, we could see insolvency numbers increase further next month.”

“Given the timing and climate, it’s vital that directors and managers are alert to signs their business could be financially distressed and seek advice as soon as they present themselves. It’s a very hard conversation to have, but speaking up when your worries are new will give you more options for improving your situation and more time to take a decision about how you move forward.”

Nick O’Reilly, Restructuring and Recovery Director at MHA said “It is unsurprising that corporate insolvency figures have risen again this month. This is a significant upward trend that we are likely to see gathering pace as we head into 2024. In the last 12 months, we have seen an increase of 16% in insolvencies compared to the same period last year. This growth has been primarily driven by smaller businesses having difficulty paying back government COVID support leading to an uptick in the number of Creditor’s Voluntary Liquidations.”

“However, as we head into 2024, we are likely to see more large-scale administrations compared to 2022 and 2023, as the impact of high interest rates begins to bite even further. Next year is likely to be the busiest year for insolvencies since 1992 as similar challenging conditions will prevail — ongoing conflicts in Ukraine and the Middle East, falling house prices, low levels of consumer confidence — combined with the lack of availability of interest payment holidays. This is highly likely to lead to some high-profile casualties.”