Business insolvencies rose by 16% in March

Latest figures from the Insolvency Service have shown that the number of business insolvencies in England & Wales for March 2023 rose by 16%.

The number of registered business insolvencies in March 2023 was 2,457, 16% higher than in the same month in the previous year (2,120). The increase in company insolvencies compared to March 2022 was driven by an increase in the number of compulsory liquidations and CVLs. The increase in compulsory liquidations is partly as a result of an increase in winding-up petitions presented by HMRC.

The business insolvencies comprised of 2,011 CVLs, which is 9% higher than in March 2022. 288 were compulsory liquidations, which is more than twice the number in March 2022. 13 were CVAs, which is 44% higher than March 2022. There were 145 administrations, which is 12% higher than March 2022. There were no receivership appointments.

The compulsory liquidations in March were more than twice the number in March 2022. Numbers of compulsory liquidations have increased from historical lows seen during the coronavirus pandemic, partly as a result of an increase in winding-up petitions presented by HMRC.

There were 2,011 Creditors’ Voluntary Liquidations (CVLs), 9% higher than in March 2022. The numbers of administrations and Company Voluntary Arrangements (CVAs) were also higher than in March 2022.

Commenting on the figures, Christina Fitzgerald, President of R3, the insolvency and restructuring trade body, and a Partner at Edwin Coe LLP said  “The rise in corporate insolvencies – to the highest levels for more than three years – has been driven by increasing numbers of Creditors’ Voluntary Liquidations, which are also at a three-year high.”

“Business owners have spent three years trading through a pandemic and economic uncertainty, and an increasing number are choosing to shut their businesses before that choice is taken away from them and as the turbulent trading climate proves too much. Businesses across Britain are struggling at the moment. Costs continue to rise at a time when consumers are cutting back on discretionary spending, and when staff are requesting pay rises to cover their bills.”

“With the Government’s Energy Bill Relief Scheme ending at the end of March, many businesses will be facing further increases in costs at a time when they can ill-afford them. Directors need to be vigilant about the signs of financial distress and seek advice as soon as they spot issues with their business or begin to worry about its finances.”

“If stock is starting to pile up, cashflow is an issue, or the business is having problems paying rent, staff or suppliers, now is the time to seek advice, rather than further down the line when these issues have evolved into problems.”

Mark Supperstone, Managing Partner at ReSolve, said“The continued rise in creditors’ voluntary liquidations and compulsory liquidations shows that many business owners are still being challenged by rising costs and economic uncertainty. Last month’s budget was a great opportunity for new policies to be introduced to help businesses survive and these figures prove the need for such government action in the immediate term. Sadly, these figures are expected and align with what we are seeing at ReSolve, with construction, retail and food service being amongst the sectors with the highest number of insolvencies.”

“We’re also seeing an increase in restructuring work with many medium sized businesses struggling with the increased cost of debt, rising costs and squeezed margins. However, there is optimism amongst many business owners who are anticipating improving conditions as the year progresses. To ensure businesses are in the best position to take advantage of better times, our advice remains the same: plan ahead and give your business as much time and opportunity as you can. An extra month can be the difference between thriving and becoming another statistic.”

Gareth Harris, Partner at RSM UK Restructuring Advisory, said “It is clear from these latest numbers and our increasing workloads that while we may not be in a technical recession, the economic headwinds are continuing to bite.  Although some confidence is returning in the wider economy those companies that are struggling are clearly seeing less options available to them than in the last four years. The majority of the current insolvency figures remain “shut-down” style liquidations of smaller companies which we expect to peak soon before falling in the second half of the year.”

 Nick O’Reilly, Director of Restructuring and Recovery at MHA said “After recent warnings, UK business administrations have now risen to pre-pandemic levels. As businesses continue to face a perfect storm of high energy bills, increasing interest rates and detrimental inflation, alongside little to no government support, we should expect administrations to continue to rise in the months ahead.”

“The government should want to avoid administrations increasing in the short term because of the impact this could have on markets and business confidence. However, given how underwhelming the Chancellor’s spring budget was in terms of business support, we have to conclude it’s a sad reality that high insolvency numbers are acceptable for the government who want to clear out the zombie companies and allow the fittest survive.”

“Fortunately, there are a lot of vacancies in the labour market which will limit the impact of job losses, keeping unemployment down and preventing a spike in demand for welfare payments.”

PwC Head of Insolvency David Kelly said  “While there was some good news earlier this month that the UK avoided a technical recession, this has been of little comfort to businesses, many of whom are still struggling with adverse economic conditions.”

“Businesses are struggling to secure financing and pay off their loans due to high interest rates and the wider impact inflation and consumer sentiment is having on sales and cash flows, so company insolvencies will likely continue to rise in the short term, making for a challenging spring,” Kelly said. “This is particularly the case following the collapse of Silicon Valley Bank, which has caused lenders to reassess risk appetites.”

“However, hard hit sectors like hospitality and leisure might soon begin to reap the benefits of the weather improving, so we hope to see the number of insolvencies in these sectors dip during the summer months, which will be a relief to pubs, restaurants and hotels who have struggled through the start of the year.”