Insolvencies at their highest in 30 years

Overall, 25,158 were registered last year – comprising of 20,577 creditors’ voluntary liquidations (CVLs), 2,827 compulsory liquidations, 1,567 administrations, 185 compulsory voluntary arrangements (CVAs) and two receivership appointments.  

Broken down, CVLs increased by nine percent from 2022 to a new record high number, while CVAs were up 67%, compulsory liquidations 44%, and administration 27% between 2021 and 2022.  

Meanwhile one in 186 active companies – at a rate of 53.7 per 10,000 active companies – entered insolvent liquidation, up from the 49.6 per 10,000 in 2022. 

However, while company insolvency volumes were at a 30-year high, the number of companies on the Companies House register has increased over time – so the 2023 rate remained much lower than the peak of 94.8 insolvencies per 10,000 active companies during the 2008/09 recession.  

Reflecting on this, R3 president Nicky Fisher said: “The last year has seen a rising tide of corporate insolvencies.  

“A combination of increased costs, cautious spending, creditor pressure, and the post-pandemic hangover have seen more businesses enter a corporate insolvency process to help address their financial issues than last year. Unless the economic picture improves, costs come down and people start spending, it seems likely that insolvency numbers will remain high this year. 

“Increases in CVLs, compulsory liquidations and administrations have driven corporate insolvencies to a 30-year high. 

“More directors have turned to CVLs this year compared to last year as a combination of fatigue, pressure from creditors and tough trading conditions have led to them shutting their doors while the decision to do so is theirs to make, and pushed the number for these insolvency processes to the highest quarterly total in more than 60 years. 

“Similar factors are driving the increase in administrations, but the harsh business climate has to be the biggest. The upsurge in consumer spending that many businesses had been hoping for since the end of lockdown hasn’t happened, or at least hasn’t been sustained, and the firms who were hanging on and hoping for it have simply run out of time and money. 

“Compulsory liquidation numbers are also substantially higher than in 2022 but are still slightly below pre-pandemic levels.  

“However, creditors are being more proactive in chasing the debts they are owed as they have their own financial pressures to manage and their own debts to pay, while 2022’s compulsory liquidation numbers were suppressed by the tail-end of the government’s support measures, which will have affected numbers in the first quarter of that year.”

 
In contrast, the number of individual insolvencies fell by 13% between 2022 and 2023 – falling from 118,766 to 103,454. It’s also the lowest annual number since 2017.  

Broken down, last year saw the lowest annual number of individual voluntary arrangements (IVAs) since 2017 and was the largest driver of the decrease. However, debt relief orders (DROs) and bankruptcies rose – with DROs at their highest annual level since their introduction in 2009. 

Meanwhile, one in 461 adults – at a rate of 21.7 in 10,000 – entered insolvency 2023, down on the 25 per 10,000 adults recorded in 2022.  

In addition to this, there were 88,390 breathing space registrations in 2023 – comprising of 86,928 standard and 1,462 mental health breathing space registrations. Breathing space numbers were also 25% higher than in 2022.  

Reflecting on this, Fisher said: “Turning to personal insolvencies, the fall in figures between 2022 and 2023 masks the fact that demand for debt advice and support is still high in England and Wales. Although IVA numbers have fallen compared to last year, Breathing Space numbers have soared, and Bankruptcy and Debt Relief Order figures are higher than in 2022.  

“This suggests people with lower levels of debt are opting for a different kind of support than the one offered by a formal insolvency process like an IVA, while the number of people who need help managing higher debt levels is on the rise compared to last year. 

“We also know that there is often a time-lag between people facing serious financial difficulties and the release of personal insolvency statistics, so the figures seen in government data may not be a real-time representation of the current hardships faced by many UK households. 

“Financial distress and money worries are still serious problems in England and Wales, and the last 12 months have hit many people’s finances hard. Rising bills, food and fuel prices were a major concern and a major expense in 2023, while high inflation forced up interest rates and left a lot of people worrying about the costs of mortgages and loans.  

“Although inflation is now falling, the prices of food, energy and fuel are still a worry for many, and could lead to an increase in personal insolvencies over the next year – especially if a cold start to 2024 leads to a further rise in energy bills.” 

Turning to the quarterly figures, 6,788 company insolvencies were registered in England and Wales in the fourth quarter of 2023 – comprising of 5,578 CVLs, 780 compulsory liquidations, 379 administrations, 50 CVAs and one receivership appointment.  

Overall, this is nine percent higher than in the third quarter of 2023 and 14% higher than in the fourth quarter of 2022. This is also the highest rate of quarterly insolvencies since the fourth quarter of 2008, and the highest number of CVLs since records began in 1960s.  

There was also a jump in individual insolvencies from the third to the fourth quarters of 2023, going up by three percent. The number of DROs that took place, meanwhile, was at its highest quarterly level since their introduction in 2009 – while IVA levels were like the numbers seen the third quarter of last year, but bankruptcies were however slightly lower.  

In addition to this, the total number of individual insolvencies was 15% lower than in the final quarter of 2022.  
Turning to year-on-year breathing space registrations, this rose by 15% to 20,890. Of these, 20,517 were standard breathing space registrations and 373 were mental health breathing space registrations.  

In Scotland, there was barely any change year-on-year in the number of company insolvencies taking place, going up from 313 in the fourth quarter  of 2022 to 314 during the same period last year. These were comprised of 196 CVLs, 105 compulsory liquidations, 12 administrations and one CVA.  

Meanwhile, 2,014 individual insolvencies were registered in the country – two percent higher than during the same quarter in 2022. This comprised of 1,393 protected trust deeds and 621 bankruptcies, of which 370 went into bankruptcy via the minimal asset process route.

In Northern, there was a 62% jump year-on-year in company insolvencies – going up to 81 in the fourth quarter of last year. This comprised of 38 CVLs, 33 compulsory liquidations, seven administrations and three CVAs.  

By contrast, individual insolvencies fell by 28% between the fourth quarters of 2022 and 2023 – dropping to 312. This was comprised of 224 IVAs, 34 DROs and 54 bankruptcies.