Year-on-year company insolvencies jump by 17%

Additionally, the 1,967 insolvencies hit last month was higher than the level seen while the government support measures were in place in response to the Covid pandemic and higher than the pre-pandemic numbers.  

Broken down, the company insolvencies consisted of 255 compulsory liquidations, 1,576 creditors’ voluntary liquidations (CVLs), 125 administrations and 11 company voluntary arrangements (CVAs). Of this, the number of CVLs, compulsory liquidations and administrations all went up year-on-year, going up by 14%, 19% and 47% respectively.  

Reflecting on this, Reed Smith partner Linton Bloomberg said: “It’s clearly a really difficult environment for many businesses to operate in.  

“The significant challenge presented by the combination of high interest rates and reduced disposable income is likely behind the increase in the number of insolvencies compared to this time last year. It seems pretty clear that things will get worse before they get better as there are further challenges looming large on the horizon that are yet to show themselves in the figures.  

“The recent IMF warning of poor growth in the UK may well oblige the Bank of England to raise interest rates again. Other ‘new clouds’ from spreading geopolitical uncertainty, meanwhile, have created the potential for further economic instability, though it should be noted it is too early to determine just how significant this will be. 

“It’s also important to remember that the figures alone don’t offer a complete picture. They can be easily skewed by a higher or lower number of CVL’s which make up a large percentage of the overall numbers.  

“With the full effect of the economic challenges facing the UK yet to be felt, we should expect this pattern of rising numbers of insolvencies to continue for the foreseeable future.” 

R3 president Nicky Fisher added: “The fact that all forms of corporate insolvency process have risen year-on-year, with the exception of CVAs which have held steady, shows that businesses are struggling on all sides and from all ends of the supply chain. 

“Compared to September 2022, more directors have turned to CVLs to wind down their businesses and more creditors have turned to compulsory liquidations to recover the debts they are owed. While numbers for these processes are higher than they were pre-pandemic, administration numbers have yet to return to 2019 levels, although they are higher than this time last year. 

“It’s clear that the challenging trading climate is taking its toll on businesses. Firms are operating in a climate where people are cutting back their spending on non-essential items, while at the same time the costs of operating a business remain high – and will only increase as the weather gets colder and the cost of borrow and servicing existing debts get more expensive.” 

Despite the year-on-year figures, month-on-month corporate insolvencies decreased by 15.2% between August and September. Reflecting on this, Mark Supperstone managing partner said, this shows there are “green shoots emerging”.  

He added: “Additionally, the planned investment in regional northern train infrastructure will boost the jobs market by creating new work for local contractors. As we have seen over the years, construction is highly susceptible to market changes and is often ‘first in, first out’ of a downturn, so watch this space.” 

Turning to individual insolvencies, the total number dropped by 27% in September in England and Wales – hitting 7,271 in the month. This consisted of 671 bankruptcies, 2,913 debt relief orders (DROs) and 3,687 individual voluntary arrangements (IVAs).  

This lower number was driven by a decline in the number of IVAs – which was less than half the number seen during the same period last year, likely in part due to a usually large number of late registrations approved in August and September. Nonetheless, the overall trend is that IVA numbers in 2023 have been lower than the record-high numbers in 2022.  

In contrast to this, DRO and bankruptcy numbers were higher than last year – although the number of bankruptcies remained less than half of pre-2020 levels.

Meanwhile, there were 7,691 Breathing Space registrations in September 2023 – 25% higher than the number registered in September 2022. Of these, 7,574 were standard breathing space registrations – 24% higher than in September 2022 – and 117 were mental health breathing space registrations, 27% more than in September 2022.  

Commenting on this, Fisher said: “Personal insolvency numbers hit a four year low in September 2023, and this is down to drop in the number of people entering an IVA.  

“Bankruptcy and DRO numbers are at their second highest level this year, which suggests the cost-of-living crisis is leading more people to seek support via a personal insolvency process – although the increase in the DRO threshold could be a reason why bankruptcy levels have yet to return to pre-pandemic levels. 

“Despite the trend, times remain tough for personal finances. The cost of living, a long succession of interest rate rises and the general health of the economy remain a major worry for many, and people are reluctant to make big purchases as they save money in the run up to Christmas and as they ensure that they have enough to cover the bills. 

“Food and energy costs are a key concern for consumers as we head into the winter months – while the cost of both of these has come down, it still hasn’t returned to pre-2022 levels.” 

In Scotland, 87 company insolvencies were registered in September 2023 – 16% lower than during the same period in 2022. This was comprised of 30 compulsory liquidations, 52 CVLs and five administrations.  

As for Northern Ireland, 37 company insolvencies were registered – 68% higher than in September 2022. This was comprised of nine CVLs, 25 compulsory liquidations, one administration and two CVAs.  

Turning to individual insolvencies, 129 were registered in the month – 15% lower than in September 2022. This consisted of 104 IVAs, DROs and 14 bankruptcies.