Insolvencies jump by more than a third in August

The highest in four years, the 2,308 insolvencies that took place in the month were also 19% higher than during the same month last year, and higher than the levels seen while the government support measures were in place in response to the Covid-19 pandemic and pre-pandemic numbers.  

Of this total, 1,880 were creditors’ voluntary liquidations (CVLs) – 13% higher than in August – while the 221 compulsory liquidations made in the month were up 45% year-on-year. In addition to this, the 195 administrations that took place was the highest seen since January 2019.  

However, the 11 company voluntary arrangements (CVAs) that took place were 15% lower than in August 2022.  

Reflecting on this, R3’s president Nicky Fisher said: “August’s corporate insolvency figures were their highest for this month in four years as a mixture of long-term economic issues, director fatigue and creditor pressure saw more companies enter an insolvency process in an attempt to resolve their financial issues or shut their doors. 

“CVLs remain high as more and more directors choose to wind down their firms, while compulsory liquidation numbers were at their highest this August for four years as creditors continue to pursue the money they are owed. 

“August’s administrations figures were the highest monthly figure we’ve seen since January 2019, which is a sign that more and more businesses are at a point where they are in need of specialist help to survive – and that a sale or a liquidation may be their only options. 

“The sad fact is that businesses are being hit from a variety of angles – and all these blows have an effect on their bottom line. Cost inflation has been a problem for some time and while this is expected to ease it is still sitting higher than many had predicted. 

“As a result of this, upward pressure on pay is continuing, while recruitment is a challenge, and people are still cautious about spending money on anything other than the essentials. It’s unlikely the picture will improve in the near future as people and businesses face the prospect of increased energy bills, and people start watching their spending even more closely.” 

In contrast to this, there was an 11% drop year-on-year in the number of individual insolvencies to have taken place – going from 9,584 to 8,536. Despite this, the 2,714 debt relief orders (DROs) to have taken place were 40% higher when compared to August 2022.  

However, the 5,174 individual voluntary arrangements (IVAs) registered was 27% year-on-year. Across the whole of this year, IVA numbers have been lower in 2023 when compared to 2022 – which had a record high annual number of IVAs.  

Fisher said: “Turning to personal insolvencies, while numbers rose month-on-month, driven by a monthly rise in IVA numbers and DROs reaching a six-month high, the total figures still fell compared to one, two and four years ago. 

“This suggests that while the cost-of-living crisis is leading to more people seeking help from the insolvency profession with their financial issues, it’s more of short-term help – the kind which doesn’t require the sale of major assets.  

“Despite this, money matters are still a major worry for many. People are concerned about their finances, the future of the economy, and the cost of housing, energy and groceries. Other worries include job security, and how they’ll manage their money as the year goes on. 

“All the signs point to more people needing some form of financial help in the future, and this could result in an increase in the number of individuals turning to a personal insolvency process to resolve their financial issues.” 

In Scotland, 112 company insolvencies were registered in August – six percent higher than during the same month in 2022. This was comprised of 71 CVLs, 33 compulsory liquidations and eight administrations – there were, however, no receivership appointments or CVAs.  

As for Northern Ireland, 12 company insolvencies took place – 14% lower than in August 2022. This comprised of six CVLs, four CVAs and two compulsory liquidations.

  
Meanwhile, 139 individual insolvencies were registered in the country – 11% higher than in August 2022. This consisted of 108 IVAs, 17 bankruptcies and 14 DROs.