Drop in quarter-on-quarter company insolvencies

However, there was an 18% year-on-year increase in these figures, going from 4,884 in the first quarter of 2022 to 5,747 in the first quarter of 2023. The figure is also the second highest number of quarterly company insolvencies to have taken place since the third quarter of 2009.  

Of the 5,747, creditors’ voluntary liquidations (CVLs) were the most common company insolvency, making up 82% of cases, followed by compulsory liquidations, with 11% of cases completed through this process.  

On CVLs specifically, the number decreased by two percent when compared to the final quarter of 2022 but was 12% higher than during the same quarter last year. Additionally, the number of CVLs in the last four quarters have been the highest in the time series.  

Responding to this, R3’s president Nicky Fisher said: “A small dip in overall corporate insolvency levels doesn’t hide the fact that more directors are choosing to shut up shop and more creditors are choosing to chase unpaid debts than 12 months ago.  

“Firms are still struggling as the trading climate remains challenging, and unless the economic picture improves, it’s unlikely numbers will drop in the near future.”  

Gareth Harris, partner at RSM UK Restructuring Advisory, added: “Despite recent predictions that the UK will avoid a recession in 2023, these figures highlight the difficult economic terrain many struggling businesses are still navigating.  

“Stubbornly high inflation, (particularly in food), the highest interest rates since 2008, significant energy prices year on year and the inability to kick start UK productivity levels are all contributing to the financial challenges and ultimately insolvency levels.  

“The disappointingly high level of both types of shut down liquidation processes shows that those companies who have come out of the pandemic with additional debt and weaker balance sheets are encountering a toxic combination which in many cases is proving impossible to overcome.” 

Broken down by industry, construction was most heavily hit by company insolvencies – making up 19% of cases, followed by wholesale and retail, accommodation and food service, administrative and support services, and professional, scientific and technical activities – making up 16%, 13%, 10%, and eight percent of cases respectively.  

Turning to individual insolvencies, 29,017 took place in the first quarter of 2023 – a two percent drop quarter-on-quarter when compared to the final quarter of 2023, while it was nine percent lower than during the same quarter in the previous year.  

Of these, individual voluntary arrangements (IVAs) were the most common individual insolvency, making up 70% of cases, followed by debt relief orders (DROs) and bankruptcies – making up 24% and six percent of cases respectively.  

Reflecting on these figures, Fisher said: “While total numbers have fallen quarter-on-quarter and year-on-year, DRO numbers have risen to levels not seen since the end of 2018, and Bankruptcy numbers are higher than three months ago and a year ago. 

“The increase in DRO numbers will largely be down to the fact that people with debts of up to £30,000 can now apply for a DRO, following a change in legislation, with those whose debts are higher than this are entering a bankruptcy in an attempt to resolve their situation. 

“Money worries are front of mind for many at the moment, as the price of energy and food, and the current and future health of the economy continue cause concern. 

“We’ve also seen household borrowing increase and an increase in people turn to credit to pay their bills. It’s understandable that people are choosing to go down this route, but it isn’t a sustainable one.”

 
Turning to the figures seen in Scotland, the first quarter of 2023 saw 297 company insolvencies take place in the country – 41% higher than during the same quarter in 2022. These comprised of 113 compulsory liquidations, 176 CVLs, seven administrations and one receivership.  

As for individual insolvencies, 1,912 took place in the first three months of 2023 – comprised of 1,322 trust deeds and 590 bankruptcies, of which 326 went in bankruptcy via the minimal asset process route. 

In Northern Ireland, 40 company insolvencies took place in the first quarter of 2023 – a decrease of 29% when compared to the same quarter in 2022. These were made up of 28 CVLs, four compulsory liquidations, two administrations and six CVAs.

 
When it comes to individual insolvencies, a total of 410 took place – down six percent when compared to the same period in 2022. This was comprised of 321 IVAs, 58 DROs and 31 bankruptcies.