Company insolvencies drop by 17% in March

Despite this, the number of company insolvencies remained much higher than those seen both during the Covid-19 pandemic and between 2014 and 2019.  

Of the 1,815 insolvencies seen last month, 1,437 were creditors’ voluntary liquidations (CVLs), 261 were compulsory liquidations and 108 were administrations, with nine company voluntary arrangements (CVAs) also taking place.   

Meanwhile one in 179 companies at a rate of 55.8 per 10,000 entered insolvency between the start of April last year and the end of March this year, compared with the 53.5 per 10,000 figure seen in the 12 months to 31 March 2023. However, it remains much lower than the 113.1 per 10,000 seen during the 2008-09 recession. 

In response, Richard Oddy – restructuring and insolvency director at Azets – said the figures suggest that the recent upturn in UK corporate insolvencies has peaked. He added: “However, caution should be exercised with respect to concluding if this is the start of a trend.  

“The prevailing economic environment remains challenging, with signs of respite being more medium term than short, and this continues to have a direct impact on businesses and their stakeholders.

“What is noticeable is that administrations, as a proportion of total insolvencies, continue to rise. During the first quarter of 2024, administrations accounted for seven percent of insolvencies, the highest since the first quarter of 2021.  

“Administrations are a rescue tool, with the ultimate goal being to preserve value (and jobs) and to facilitate a restructure of the business.  

“A continued increase points towards increased resilience in the economy; whilst UK corporates remain in a challenging environment, they are at least looking to the future with optimism – there is light at the end of the tunnel. 

“That said, the stakeholder groups of the UK corporates are awakening to their options, and the relatively benign post-Covid environment is coming to an end. Whether its funders increasingly seeking to intervene to protect their position, HMRC being more proactive, or landlords seeking to exercise powers more frequently, the pressure is increasing.” 

ReSolve managing partner Mark Supperstone added the figures further confirmed his firm’s “now long-held view that UK insolvencies will continue to remain, at the very least, above average and inflated until potentially the first quarter of next year”.  

He went on to say: “Currently, it appears that a tsunami of insolvencies is being avoided, however a major influx cannot be ruled out in the coming months. 

“Many will see the prospect of lower interest rates and lower levels of inflation as a cause for optimism. While undoubtedly vital, it is important to remember that these changes generally take around 18 months to fully materialise in businesses’ financials, and so shouldn’t be viewed as a one-size-fits-all quick fix.” 

R3 president Tim Cooper, meanwhile, said: “High costs and constrained spending have continued to hit businesses hard in the first three months of this year.  

“The latest available sectoral data shows that construction is currently the industry experiencing the highest levels of insolvency, and the figures for this sector for November 2023 to January 2024 are slightly higher than they were in the same period last year.  

“This is because insolvency numbers have increased amongst firms working on the construction of residential and non-residential buildings, as well as in specialist construction activities. 

“I would suggest that the main drivers of this are the delays in construction starts in the three months to October of last year, which will have affected the main contractors and those specialist construction firms whose work takes place in the later stages of construction projects.  

“These specialist firms are also vulnerable to impacts of delayed start times and of the cost of materials. There were also a number of high profile construction sector insolvencies in that period, and the cascade-effect can take a while to impact on the supply chain into this sector. 

“While the wider trading climate is a challenging one, there are signs directors expect revenues to increase this year, and this suggests the mood among the business community is becoming more positive.  

“However, it remains to be seen whether inflation falls quickly enough to benefit businesses, and whether the hoped-for increases in income outstrip potential rises in costs and wages.” 

Turning to individual insolvencies, and again England and Wales saw a drop in both the month-on-month and year-on-year figures – falling by 19% and nine percent respectively.  

Of the 8,708 to have taken place last month, 5,399 were individual voluntary arrangements (IVAs), 2,628 were debt relief orders (DROs) and 681 were bankruptcies. DRO numbers were slightly lower than the recent high monthly figures seen in the second half of 2023 – but remained elevated compared to historical levels.  

Meanwhile the number of bankruptcies were similar to what we’ve seen over the past nine months, and slightly higher than in March 2023 – however bankruptcy numbers remained at around half of pre-2020 levels.  

Additionally, in the 12 months to the end of March, one in 470 adults in England and Wales entered insolvency at a rate of 21.3 per 10,000 adults – lower than the 24.3 per 10,000 adults seen in the 12 months to March 2023. Alongside this, there were 7,710 Breathing Space registrations made last month – seven percent lower than in March 2023.  

Responding to this, Cooper said: “Despite the fall in personal insolvencies, the cost-of-living crisis and paying for basic expenses continue to be issues for consumers. Food, fuel, heating and housing costs have all remained high, and people are cutting discretionary spending to make sure enough money is left to pay for the essentials.  

“The future of the economy and the security of people’s finances remain key areas of concern, and many people are shying away from making major purchases as they look to save wherever and whatever they can. 

“This situation isn’t expected to change soon – and with household debts increasing, unemployment rising and real post-tax household income not expected to return to where it was before the pandemic until the end of next year, times will remain tight for many.” 

Scotland, meanwhile, saw 115 company insolvencies registered in March – up 11% year-on-year – comprising of 62 CVLs, 44 compulsory liquidations, and nine administrations.  

Northern Ireland also saw a jump in company insolvencies, with the 26 registered being 100% higher when compared to March 2023, with this comprising of 14 CVLs, eight compulsory liquidations, three CVAs and one administration.

It did, however, see a 21% year-on-year drop in individual insolvencies, with the 123 figure being comprised of 91 IVAs, 23 bankruptcies and nine DROs.