40% year-on-year jump in company insolvencies

In total, 2,552 were registered in the month. Of this, 2,181 were creditors’ voluntary liquidations (CVLs) – 38% higher than in May 2022 – and 189 were compulsory liquidations – 34% higher than during the same month the previous year.  

There were also year-on-year increases in creditors’ voluntary arrangements and administrations - increasing by 121% and 80% respectively.  

Overall, month-on-month corporate insolvencies also increased – going up by 51.2%. Responding to this, R3’s president Nicky Fisher said: “Three years of economic turmoil is taking its toll on businesses.  

“The corporate insolvency figures published today are the highest we’ve seen since January 2019 as the fallout from battling the effects of the pandemic, coupled with rising costs, increased creditor pressure, and high inflation, is causing more businesses to turn to an insolvency process to help resolve their financial issues. 

“The key driver of the rise in numbers is the increase in Creditors Voluntary Liquidations, which are also at a near-four and half year high and more than twice the number they were in May 2019. More and more directors are running out of time and options, and are choosing to liquidate their businesses before the choice is taken away from them. 

“Firms are operating in a market where people are spending cautiously, costs are increasing and suppliers are chasing debts in an attempt to manage their own cashflow challenges, which is creating a tough climate for businesses of all sizes at a time where they needed an injection of cash. 

“While the summer months might provide some relief from energy costs, firms will have to pay to keep their premises, staff and customers cool, which will hit any potential savings.” 

Hargreaves Lansdown’s head of money and markets Susannah Streeter added: “The jump in the number of insolvencies comes at a time when problems are piling up for businesses. Even though the UK appears to be swerving a recession for now, the triple whammy of the rapid hike in borrowing costs, a super-tight labour market and onerous energy bills has been too much to bear for many firms.  

“Spying little light at the end of the tunnel, with interest rates expected to keep rising, they are shutting up shop in greater numbers, as their debts have mounted up. During the pandemic, as the country went into panic mode, there was greater help available for firms, such as loans and relief measures aimed at ring-fencing businesses from aggressive creditor enforcement, which kept insolvency numbers lower.  

“But now, as firms are still battling through an inflationary crisis, insolvencies have surged higher than pre-pandemic times.” 

Turning to individual insolvencies, 2,505 debt relief orders (DROs) and 617 bankruptcies took place in England and Wales in May – a 23% and five percent increase when compared to the same month in 2022. 

Focusing on bankruptcies, this was made up of 521 debtor applications and 96 credit petitions – up five percent and three percent respectively.

As for individual voluntary arrangements (IVAs), there were on average 6,767 registered a month in the three-month period endping in May 2023 – 14% lower than during same period in 2022, with IVA number so far being lower in 2023 than in 2022 – which had a record high annual number of IVAs. 

Overall, there was also a month increase in personal insolvencies – increasing by 10.7% when compared to the figures in April. Responding to this, Fisher said: “This monthly increase is likely to be the result of last month’s backlog of cases being resolved, but does also show the effect the cost of living is having on people’s finances and their ability to remain solvent. 

“Money worries are still a key concern for many people. Food and energy costs are the largest concerns, and people are avoiding spending on anything other than the essentials as they focus on paying their bills. 

“While consumer confidence has improved, both in the short-term and compared to last year, people are still worried about the economy and their finances, and reluctant to make any major purchases. 

“Over the summer, inflation and interest rates could cause problems for people looking to take out or renew mortgages and may be the pinch point for those who are just about managing right now.” 

In Scotland, 97 company insolvencies took place – four percent higher than the number seen in May 2022. This was comprised of 35 compulsory liquidations, 57 CVLs and five administrations.  

In Northern Ireland, 11 company insolvencies took place – 45% lower than in May 2022. This was comprised of eight CVLs, two compulsory liquidations and one CVA.  

Turning to individual insolvencies, 188 took place in the country – 31% higher than during the same month the previous year. This consisted of 154 IVAs, 19 bankruptcies and 15 DROs.