Corporate insolvencies at their in February highest in four years

This figure is 17% higher than the 1,518 figure recorded during the same month the previous year and 33% higher than the number registered three years prior in February 2020.  

Of the 1,783 registered, 1,505 were creditor voluntary liquidations (CVLs), up on both the figure recorded during the same month last year and in 2020 – by 13% and 59% respectively. As for compulsory liquidations, 158 took place – with this being twice the number seen in February 2022 but 32% lower than in February 2020.  

Meanwhile, 108 administrations took place in the month – similar to that seen in February 2022, but 27% lower than in February 2020, while it also 12 creditors’ voluntary arrangements (CVAs) - four times higher than during the same month the previous year, but 37% lower than February 2020.  

Overall, there was also a 6.7% increase in the number of corporate insolvencies to have taken place in January 2023 and is at their highest level in four years. Reflecting on this, R3 vice president Nicky Fisher said: “After nearly three years of lockdowns, supply chain issues, rising costs and falling revenues, many business owners have simply had enough, and are shutting up shop before they are forced to. 

“Trading conditions remain tough for many businesses in England and Wales – and it seems like the traditional Christmas and New Year trading period didn’t give them the boost they needed to survive.  

“People are still very worried about money and the economy, and are reluctant to spend on anything other than the basics, while at the same time the costs of energy, fuel and wages continue to be a major concern for businesses. 

“Now is the time for directors to be aware of the signs their businesses are struggling and to seek advice if they show themselves. Cashflow issues, payment delays and rising stock are all signs a business is distressed and the earlier directors seek advice, the more options they have open to address the issues they face.” 

The publication of these figures comes ahead of the Chancellor’s Spring budget (15 March). Nick O’Reilly, director of restructuring and recovery at MHA, suggests that – with it being “almost certain” insolvencies will increase in the coming months – the government must “stem the tide” by introducing new investment and growth incentives for businesses.  

He said: “All signs point to ever increasing insolvencies in the months ahead. While the fall in UK inflation provides some relief for businesses, it will have arrived too late for many companies who remain crippled by high interest rates and challenging energy prices. 

“Tomorrow’s spring budget provides the Chancellor with a golden opportunity to introduce new business incentives to restore confidence among UK businesses. 

“The chancellor should prioritise incentives for companies that are thriving or have potential for growth rather than propping up the countless zombie companies that are merely hanging on or are showing no signs of growth or innovation.  

“Delivering on the long-promised overhaul on business rates would provide much needed relief for businesses. More targeted energy support would also provide financial rest bite and enable companies to plan with greater certainty across the remainder of 2023.”  

As for individual insolvencies, 2,083 debt relief orders (DROs) and 580 bankruptcies were recorded in England and Wales in February.  

Of the bankruptcies, 486 were debtor applications and 94 creditor petitions – three percent lower than in February 2022. Broken down, debtor applications were two percent lower and creditor petitions 11% lower than in February 2022.  

When compared with February 2020, total bankruptcies were 63% lower – with debtor applications 64% lower and creditor petitions 55% lower. Overall monthly bankruptcy numbers over the past 18 months were lower than the numbers in 2020, which were already lower than pre-pandemic levels.  

Looking at DROs, the number in 2023 was 13% lower than during the same month in 2020 and seven percent lower than in February 2022. These numbers did increase following an eligibility change in June 2021 and for the past year have been slightly lower than pre-pandemic levels. 

Additionally, there were on average 5,627 individual voluntary arrangements (IVAs) per month in the three-period ending in February 2023 – 12% lower than during the same period in 2022, but similar to the three months ending in February 2020.  

These figures were, however, higher than in January – due to an increase in the number of people entering an IVA or DRO. Responding to this, Fisher said: “Money worries are a reality for many people at the moment. Inflation continues to take its toll, and whilst the winter may have been weathered by many, the squeeze on household finances continues to weigh heavy on people’s minds. 

“Many households may have relied on savings or low-level credit to help them absorb high inflation, but with energy and food prices unlikely to fall to pre-2022 inflation levels in the next two or three years, pressure on personal finances will remain a concern for many. 

“It can only take one financial shock – a missed payment, reduction in hours at work or illness – to mean people whose finances are tight become insolvent, as debts they were struggling with but managing to pay become unpayable.” 

In Scotland, 81 company insolvencies were registered – 11% higher than in February 2022 but five percent lower than during the same month in 2020. This was comprised of 21 compulsory liquidations, 57 CVLs and three administrations.  

In Northern Ireland, nine company insolvencies were registered – 50% lower than during the same month in 2022 and 67% lower than in February 2020. This was comprised of six CVLs, two CVAs and one compulsory liquidation.  

As for individual insolvencies in the country, 111 took place – 31% lower than in February 2022 and 59% lower than in February 2020. This consisted of 87 IVAs, 16 DROs and eight bankruptcies.