CVL and compulsory liquidations drives a 27% increase in company insolvencies

The increase was driven by a jump in compulsory liquidations, going up by 77% year-on-year – going up from historical lows seen during the Covid-19, partly as a result of an increase in winding-up petitions. Meanwhile, Creditors’ Voluntary Liquidations (CVLs) went up by 21% when compared to June 2022 – while numbers of administrations and Company Voluntary Arrangements (CVAs) also higher. 

Responding to this, Kroll managing director and co-head of global restructuring Sarah Rayment said: “Insolvencies are on the rise, and we are tracking higher rates of administrations and liquidations compared to last year. Ultimately, I don’t think this comes as a surprise.

“Many companies emerged out of the pandemic already over leveraged. They are now managing higher borrowing costs and cost inflation, alongside wider economic factors. It’s inevitable not all will survive, especially those in consumer facing sectors.” 

R3 president Nicky Fisher add: “Firms are trading in a time of cautious consumer spending and rising costs, which are hitting margins and profits hard.  

“Directors expect costs and wages to rise further as the year goes on, and if these don’t translate into more demands for goods and services, it could be the final blow for those businesses that are just managing to survive. Rising interest rates are another potential challenge, as that will make the cost of borrowing more expensive and may price some firms out of the survival funding they’ll need.” 

There was, however, a 15.3% decrease in corporate insolvencies going from 2,553 to 2,163.

Turning to individual insolvencies, 643 bankruptcies were registered in England and Wales – 29% higher than in June 2022 but less than half of pre-2020 levels.  

Additionally, 2,320 debt relief orders (DROs) took place, up 21% when compared to June 2022, while DRO numbers between both April and June 2023 were similar to pre-2020 levels. There were also, on average, 6,026 Individual Voluntary Arrangements (IVAs) registered per month in the three months ending in June 2023 – 22% lower than during the same period in 2022.  

Like corporate insolvencies, however, personal insolvencies overall decreased month-on-month by 18.7%. 

According to Fisher, while there has been a reduction in all types of personal insolvencies between May and June, the financial picture is still a difficult one for many in England and Wales.  

She added: “People are worried about the economy and reluctant to spend on anything more than the essentials. The cost of living and concerns about job security are front of mind for many, and with wages failing to keep pace with inflation households are tightening their purse-strings. 

“Personal debt and credit card debt have both increased, and credit cards are increasingly being used to pay for basics like food shopping. It’s understandable why people would do this, but it isn’t a sustainable or sensible move, so I suggest anyone in this position looks at their outgoings and sees where they could make changes – especially as rising interest rates are going to increase the costs of borrowing." 

In Scotland, 113 company insolvencies were registered – 51% higher when compared to the same month the previous year. This was comprised of 72 CVLs, 36 compulsory liquidations and five administrations.  

In contrast, Northern Ireland saw a 44% drop year-on-year between June 2022 and June 2023 – with the 14 registered comprising of 11 CVLs, two compulsory liquidations and one CVA. As for individual insolvencies, 160 took place in the country – 19% higher than in June 2022 – and consisted of 110 IVAs, 14 DROs and 36 bankruptcies.