Month-on-month decrease in insolvency numbers in January

This is, however, an increase of 6.6% when compared to the 1,567 figure seen in January 2022, and is 11% higher than the number registered during the same month in 2020. The year-on-year increase was driven mainly by a rise in compulsory liquidations and creditor voluntary liquidations (CVLs).  

According to the government body, the rise in compulsory liquidations is partly as a result of an increase in winding-up petitions presented by HMRC. These hit 189 in January 2023 – 52% higher than the same month previous year, but 36% lower than in January 2020.  

As for CVLs, 1,382 took place in the month – higher than both the year-on-year figures and the number seen in 2020, increasing by two percent and 37% respectively. Meanwhile, 14 creditor voluntary arrangements (CVAs) took place – eight percent higher than January 2022, but 56% lower than in January 2020. 

The remainder of the overall figure was made of 86 administrations – 21% higher than in January 2022, but 49% lower than during the same period in 2020.  

Responding to this, R3’s president Christina Fitzgerald said: “Despite the monthly fall in corporate insolvencies, numbers are still higher than they were in January 2020, 2021 and 2022 – and not far below what they were in January 2019.  

“And the reason for this is a rise in the numbers of Creditors’ Voluntary Liquidations, which are higher than the previous three Januarys. Directors are still turning to this process to close down their businesses as trading conditions and creditor pressures remain tough – and many are taking this step before the choice is taken away from them.   

“It’s been an unhappy New Year for businesses in England and Wales. The cost-of-living crisis and ongoing economic issues have meant the traditional new year spike in sales hasn’t happened, and we’ve seen a number of household names enter an insolvency process over the last month in an attempt to resolve their financial issues. 

“As household disposable income contracts and pay lags behind inflation, many people are cautious about how and where they spend their money and are looking to make cuts in essential and non-essential spending. 

“This is a further blow for businesses who are looking to get back on their feet after a torrid three years and are now caught in a pincer movement of rising costs and falling income.” 

ReSolve managing partner Mark Supperstone added: “This month’s statistics once again show that businesses face a plethora of challenges, with HMRC continuing to be a thorn in the side of many.  

“Interestingly, administrations remain relatively low compared to pre-pandemic levels, however, I sense they will rise over the course of this year, particularly if inflationary pressures continue and there is no easing of the cost-of-living crisis.  Whilst business owners are enterprising people, and many are striving to fight on, the question becomes how long they can continue with all of the pressures they are facing. 

“While we may well avoid a “technical recession” this year, the compounding issues of the cost-of-living crisis and energy prices will make it feel like a recession for many and lead to continuing difficulties ahead, especially for already struggling sectors like retail, hospitality and food services.” 

Looking at individual insolvencies, 1,741 debt relief orders (DROs) and 612 bankruptcies took place in the opening month of 2023 in England and Wales. Of the bankruptcies, 518 were debtor applications and 94 creditor petitions – with the overall bankruptcy rate over the past 18 months being lower than the numbers in 2020, which were already lower than pre-pandemic levels.  

Despite this, bankruptcies were five percent higher than in January 2022, while debtor applications two percent higher and creditor petitions 21% higher year-on-year. In contrast, both bankruptcies and debtor applications were 60% lower when compared to the same month in 2020, while creditor petitions were 61% lower.  

As for DROs, there was both a drop year on year and compared to 2020 – falling by 21% and seven percent respectively. This comes after an increase in DRO numbers following an eligibility change in June 2021, and for the past year have been slightly lower than pre-pandemic levels.  

Responding to these personal insolvency figures, Fitzgerald said: “The fall in personal insolvencies is a result of a drop in the number of people entering DRO and an Individual Voluntary Arrangement (IVA). It’s important to note that some IVA numbers for the last two days of January haven’t been included in this month’s figures, so the true picture of personal insolvencies in England and Wales for January isn’t yet available.  

“However, it’s worth noting that while bankruptcy numbers have increased monthly and yearly, they are still well below 2020 and 2019 levels. This suggests that while more people have entered a bankruptcy than last month, the cost-of-living crisis isn’t translating into an increase in the number of people needing this process to resolve their financial distress. 

“Despite this, money worries are still front of mind for many people in England and Wales, and as costs rise and wages continue to lag behind inflation, people are watching their outgoings like hawks. 

“Heating, eating and travelling are continuing to become more expensive, and there are a lot of people who are worried about their bills, their financial futures, and the economy and are cutting their costs wherever they can as a result.” 

Looking at the figures for Scotland, 109 company insolvencies were registered in the country – a 114% increase on the number seen during the same year in 2022, and 51% higher than January 2020. This was comprised of 53 compulsory liquidations, 54 CVLs and two administrations. 

In contrast, there was a drop in the number of company insolvencies seen in Northern Ireland in the month – with the 14 being registered being 22% lower year on year and 46% when compared to January 2020. This was comprised of nine CVLs, four CVAs and one compulsory liquidation.  

As for individual insolvencies, 123 look place in the country – with this being 26% higher year on year but 51% lower than in January 2020. This consisted of 103 IVAs, 15 DROs and five bankruptcies.