Significant jump in insolvencies seen in April

This increase is more than the average absolute change of 12% seen in consecutive months over the past three years and, while company insolvency numbers have been volatile over the past few months, there’s no clear indication of an increasing or decreasing trend.  

Of these, creditor voluntary liquidations (CVLs) accounted for 79% of all company insolvencies – 18% higher than in March, and 17 higher than during the same month in April 2023. Meanwhile, the number of seasonally adjusted compulsory liquidations in April 2024 was 11% higher than last month, and 21% more than in April 2023. 

Alongside this, administration numbers rose by 36% month-on-month and comes as the number administrations went up in 2022 and 2023 after an 18-year annual low seen during the pandemic in 2021.  

Creditor voluntary arrangements (CVAs) also saw an increase, growing by 50% year-on-year, with there being twice as many as in March. Having said this, these numbers remain low when compared to historical levels.  

Overall, the company liquidation rate in the 12 months to April 2024 was at 57 per 10,000 companies – up from the 55.8 per 10,000 recorded in March.  

Commenting on the findings, R3 president Tim Cooper said: “The last year and the last quarter have seen corporate insolvency numbers reach a level not seen since the previous recession in 2008-09.  

“The fact the UK had entered a recession (albeit relatively modest) during the last two quarters of 2023 was a contributing factor, however the recession would appear to have been short lived with a better than expected growth in GDP of 0.6% between January and March which has largely cancelled out the recession itself.   

“Against this backdrop, inflation is falling and the Bank of England have held interest rates for a further month, with market speculation abundant as to whether and when a cut is on the cards.  

“Corporate registrations are at a record high, so there are factors at play which suggest some return of business confidence, if not consumer confidence with cost-of-living pressures still playing their part. Working out what is going on is therefore becoming more nuanced than simply blaming the pandemic, cost of living, inflation and interest rates.” 

ReSolve’s Mark Supperstone added: “The insolvency figures have once again jumped to elevated levels, above pre-pandemic numbers. The dip we saw in March may have been an anomaly, perhaps due to the early Easter break, leading some businesses to delay inevitable decision making. 

“A difficult macro-environment persists with heightened interest rates and wage growth becoming an increasing threat with the latter having exceeded anticipated levels in first quarter of this year.” 

Individual insolvencies followed a similar trajectory during the month, with the 9,651-figure seen in England Wales in April being 10% higher than what was seen in March, and an increase of five percent when compared to April last year.  

Broken down, these consisted of 5,567 individual voluntary arrangements (IVAs), 3,436 debt relief orders (DROs) and 648 bankruptcies. And, while the number of IVAs registered were similar to the numbers seen over the past 12 months, DRO numbers hit a record high in the monthly time series going back to their introduction in 2009.  

More encouragingly, in the 12 months to the end of April, one in 463 adults entered insolvency – at a rate of 21.6 per 10,000 adults – a drop from the rate 24.1 per 10,000 adults during the same period last year.  
Breathing space registrations, meanwhile, rose by 16% year-on-year in the month – increasing to 7,649.  

Responding to this, Cooper said: “Breathing Space numbers have fallen compared to last month, but are still higher than they were in April 2023 and 2022. When this is considered alongside the numbers for the other personal insolvency processes, it’s clear that a significant number of people are in need of either debt advice, or debt solutions.  

“Based on the figures, it seems the majority of these people are choosing to either seek protection from creditor action while they explore their options, or enter processes that enable them to come to an arrangement with their creditors when it comes to repaying their debts. 

“It’s also very clear the cost-of-living crisis is still taking a toll on people’s finances. Prices are continuing to rise despite the fall in inflation, and we’re hearing reports of people turning to credit to bridge the gaps in their finances.  

“Despite these issues, the mood among consumers is becoming more positive – people seem more optimistic about their personal finances over the next year, although it’s worth noting that the future of the economy, the cost of living and concerns around job security remain key areas of concern.” 

In contrast, Scotland saw company insolvencies drop by four percent year-on-year falling to 109 – with this being comprised of 59 CVLs, 48 compulsory liquidations and two administrations.  

Northern Ireland – however – saw company insolvencies rose by more than three times as many as in April 2023, rising to 33. Of these, 17 were compulsory liquidations, 12 were CVLs, two were CVAs and two were administrations.

Meanwhile, 112 individual insolvencies were registered in the month in the country – consisting of 84 IVAs, 20 bankruptcies and eight DROs.