Business insolvencies increased by 19% in August

Latest figures from the Insolvency Service have shown that the number of business insolvencies in England & Wales for August 2023 increased by 19% (2,308) 19% higher than in the same month in the previous year (1,941 in August 2022). 

Business insolvencies increased by 33.6% in August 2023 to a total of 2,308 when compared to July’s total of 1,728, of the 2,308 registered business insolvencies in August 2023, 1,880 CVLs, which is 13% higher than in August 2022. 221 were compulsory liquidations, which is 45% higher than August 2022. 11 were CVAs, which is 15% lower than August 2022. There were 195 administrations, which is 68% higher than August 2022 and
one receivership appointment.

The figures showed that were 221 compulsory liquidations in August 2023, 45% higher than in August 2022.

In August 2023 there were 1,880 creditors’ voluntary liquidations (CVLs), 13% higher than in August 2022. The number of administrations was also higher than in August 2022. Business insolvencies increased by 71.3% from August 2021’s total of 1,347 and by 69.1% compared to pre-pandemic levels in August 2019 (1,365).

Nicky Fisher, President of R3, the UK’s insolvency and restructuring trade body said “August’s corporate insolvency figures were their highest for this month in four years as a mixture of long-term economic issues, director fatigue and creditor pressure saw more companies enter an insolvency process in an attempt to resolve their financial issues or shut their doors.”

“Creditors’ Voluntary Liquidations remain high as more and more directors choose to wind down their firms, while compulsory liquidation numbers were at their highest this August for four years as creditors continue to pursue the money they are owed.”

“August’s administrations figures were the highest monthly figure we’ve seen since January 2019, which is a sign that more and more businesses are at a point where they are in need of specialist help to survive – and that a sale or a liquidation may be their only options.”

“The sad fact is that businesses are being hit from a variety of angles – and all these blows have an effect on their bottom line. Cost inflation has been a problem for some time and while this is expected to ease it is still sitting higher than many had predicted.”

“As a result of this, upward pressure on pay is continuing, while recruitment is a challenge, and people are still cautious about spending money on anything other than the essentials.”

“It’s unlikely the picture will improve in the near future as people and businesses face the prospect of increased energy bills, and people start watching their spending even more closely.”

“Our message to directors is simple: be alert to signs your business could be financially distressed and seek advice as soon as they show themselves. If you’re having problems paying wages, staff or suppliers, if stock is starting to pile up, or if you’re worried about your business and its finances, that’s the time to speak to a qualified advisor.”

Nick O’Reilly, Director of Restructuring and Recovery at MHA, said “Today’s statistics continue to paint a dreary picture, with small liquidations dominating. The recent demise of Wilko serves as a stark reminder of the challenges facing the sector. With Christmas approaching, retailers will be pinning their hopes on a much-needed seasonal boost. It is high time for the government to take decisive action to protect businesses and consumers by addressing the sector’s pressing concerns with more comprehensive reforms.”

“Unfortunately the government’s recent revisions to insolvency regulation have fallen disappointingly short of expectations. Rather than delivering the hearty reform needed to boost consumer and business confidence, these changes appear cosmetic and inadequate.”

“A glaring oversight in the proposal is the absence of a single independent regulator for insolvency practitioners, a crucial element for ensuring transparency and accountability. The proposed amendments, though generating attention, are unlikely to satisfy concerns from stakeholders who interact with members of the insolvency profession.”

Gareth Harris, Partner at RSM UK Restructuring Advisory, said “The increase in CVLs, which are predominantly seen amongst smaller companies, reflects the fact that directors of smaller businesses with weak balance sheets and faced with challenging trading conditions have now run out of available options and are having to shut their doors. We expect the numbers of CVLs to fall towards the end of the year as these insolvencies are flushed through the system. The increase in administrations, a rescue process which enables a business to restructure and the viable elements of a business to be saved, whilst expected, is larger than anticipated and reflects the adverse impact that the rises in interest rates and challenging trading conditions are having on larger corporates. This is particularly the case in sectors such as construction where there have been several large failures in recent months.”