Insolvencies jump by 17.6% in October

The jump to 2,315 is also 18% higher than the 1,954-figure seen during the same period last year – with this also being higher than pre-pandemic numbers seen in 2019. It consisted of 1,889 creditors’ voluntary liquidations (CVLs), 256 compulsory liquidations, 146 administrations, 23 company voluntary arrangements (CVAs) and one receivership. 

Of these, compulsory liquidation, CVL, CVA and administration figures were all higher than seen during the same month last year.  

R3 president Nicky Fisher said: “Firms have been battling economic issues for three and a half years now, and corporate insolvency numbers are rising as more and more directors run out of options.  

“The figures show that CVLs and administrations are at the highest levels we’ve seen in October in more than four years, and this reflects the tough trading climate and the level of director fatigue among the business community in England and Wales. 

“Businesses are being battered from all sides. Costs have increased, demands for wages are incoming and people are spending less as they look to save ahead of the winter and to make sure they have enough left to cover the basics.  

“If the Christmas trading period doesn’t bring a wave of new income, we could see insolvencies continue to rise in the new year, and at the moment, it’s impossible to predict whether this will be a badly needed boost or the final blow for struggling firms. 

“In these kinds of circumstances, it’s critical that directors are alert to the signs of financial distress, and act if any of them present themselves. Cashflow problems, stock piling up and issues paying rent, taxes or suppliers are all signs that a business is distressed and need to be acted upon before they get any worse – and while the business has as wide a range of potential solutions open to it as possible.” 

ReSolve managing partner Mark Supperstone added: “These numbers report a further increase in insolvencies, which was not entirely unexpected following the release of the quarterly insolvency statistics a couple of weeks ago revealing that insolvencies in England and Wales were at their highest level since the global financial crisis.  

“With the current economic headwinds, unfortunately, we can expect to see insolvencies continue to rise over the following months. 

“Retail and hospitality are particularly suffering and many in this sector will be hoping for a strong Christmas trading period in order to survive. Likewise, construction and real estate are also at the top of the insolvency data; a trend that has been ongoing for a while due to surging borrowing costs and waning demand. 

“Many companies in these struggling industries will be looking for support from the chancellor in the Autumn Statement to give them a spark of hope for the year ahead, such as a reinstatement of VAT-free shopping for overseas visitors and offering first time buyers more mortgage support. We hope that the Budget will contain some festive news for business owners and consumers.” 

Turning to individual insolvencies, 9,881 took place in England and Wales – six percent lower than in the same month the previous year. This decrease was driven by a decline in individual voluntary arrangements (IVAs), which was 27% lower than October 2022.  

Debt relief orders (DROs), meanwhile, increased by 71% year-on-year – going up to 3,245, while bankruptcies went up by 28%, and debtor applications were 18% higher.  

Month-on-month, however, personal insolvencies went up.  

Commenting on this, Fisher said: “Turning to personal insolvencies, the month-on-month rise we’ve seen is down to an increase in IVA numbers, but that may well be down to the date these processes are registered with the Insolvency Service, and changes to the rules around how this process is marketed than a sudden surge in people turning to IVAs. 

“Of more interest is the fact that DRO numbers are at a four-year high – partly because it illustrates that the change in threshold has led to more people entering this process, but also because the rise in numbers, coupled with bankruptcy numbers reaching their highest level since June 2021, show there is a demand for personal insolvency support due to the cost of living crisis.  

“Despite the fact that personal insolvencies are below pre-pandemic levels, household finances remain tightly squeezed. Although food inflation has fallen, prices remain higher than they were a year ago, and this, coupled with the costs of fuel and energy are a major worry for individuals and a strain on personal finances. 

“These issues, coupled with concerns about the economy, and rising prices mean people are cutting their spending back to the bone and looking for any opportunities to save money. This is likely to increase as winter sets in, as people save for Christmas and to make sure they can cover their heating and food costs.” 

Turning to the figures in Scotland, 99 company insolvencies took place in the country – 21% higher than the number in October 2022. This was comprised of 58 CVLs, 35 compulsory liquidations, four administrations and two CVAs.  

In Northern Ireland, 27 company insolvencies were registered in the country – 80% higher than during the same month last year. It was comprised of 14 compulsory liquidations, 12 CVLs and one administration.  
Meanwhile, 125 individuals in the country – 22% lower than in October 2022. This consisted of 94 IVAs, 24 bankruptcies and seven DROs.  

Reflecting on the figures, MHA’s director of restructuring and recovery Nick O’Reilly said: “The government must act swiftly to stem the rising tide of insolvencies and stimulate growth.

“The current plight of hospitality and retail businesses demands urgent government intervention through a comprehensive overhaul of the business rate system. The government must create a system that is based on turnover rather than property values.  

“A minimum fixed rate that increases based on turnover would mean that retailers and local authorities would both be winners when a business does well and ensure they are not overburdened in downturns. HMRC also desperately requires increased funding to streamline its financial debt recovery processes. 

“The existing Time to Pay system is a postcode lottery as to whether a firm will secure an agreement to repay its debts or face a winding up petition. Businesses need a more cohesive approach from HMRC so they have greater certainty when it comes to managing finances. 

“To stimulate growth, a multifaceted approach is needed. This should include the reduction of red tape on exports, lowering interest rates and implementing a tax stimulus. Businesses yearn for policies that instill hope and foster a conducive environment for sustained growth.

 
“It is high time the government implemented measures that resonate with the needs of businesses and propel the economy forward.”