Corporate insolvencies increased by nearly 14% during 2023 and are likely to remain high this year unless the economic picture improves, according to R3, the UK’s insolvency and restructuring trade body.
R3 regional head Neil Stewart, responding to the publication of the 2023 annual corporate and personal insolvency statistics for England and Wales, is cautiously optimistic that the landscape will improve this year, despite last year’s difficulties.
Just published Insolvency Service figures reveal there were 25,158 seasonally adjusted corporate insolvencies in 2023 – an increase of 13.7% from 2022’s figure of 22,123,
This was also an increase of 78.9% on 2021’s figure of 14,059 and an increase of 46.6% on pre-pandemic figures in 2019 (17,163).
There were 103,454 seasonally adjusted personal insolvencies in 2023 – a decrease of 12.9% on 2022’s figure of 118,766, a fall of 6% on 2021’s figure of 110,044 and a fall of 15.3% compared to pre-pandemic levels in 2019 (122,147).
Neil, chairman of R3’s Southern and Thames Valley region, said: “The last year has seen a rising tide of corporate insolvencies.
“A combination of increased costs, cautious spending, creditor pressure, and the post-pandemic hangover have seen more businesses enter a corporate insolvency process to help address their financial issues than in 2022.
“If the overall economic picture improves, costs stabilise and spending picks up as consumer and business confidence increase, then the tide should start to turn.
“It is inescapable, though, that increases in creditors’ voluntary liquidations (CVLs), compulsory liquidations and administrations have driven corporate insolvencies to a 30-year high.
“More directors turned to CVLs in 2023 than in 2022 as a combination of creditor pressure, the high cost of borrowing and tough trading conditions proved terminal. This pushed the number for these insolvency processes to the highest quarterly total in more than 60 years.”
He added that similar factors have driven the increase in administrations, with the harsh business climate to have been the biggest contributor.
“The upsurge in consumer spending that many businesses had been hoping for since the end of lockdown didn’t happen, or at least wasn’t sustained, and many businesses hoping for that time to come simply ran out of time and money.
“Compulsory liquidation numbers were also substantially higher than in 2022, but still slightly below pre-pandemic levels.
However, creditors are being proactive in chasing the debts they are owed as they have their own financial pressures to manage.
“The figures are also distorted by the 2022 compulsory liquidation numbers having been suppressed by the tail-end of the Government’s support measures, which affected numbers in the first quarter of that year.
Neil, a regional associate director at insolvency litigation financing company Manolete Partners, added: “Turning to personal insolvencies, despite the fall in figures between 2022 and 2023, demand for debt advice and support remained high in England and Wales.
“Although individual voluntary arrangement (IVA) numbers fell in 2023, breathing space numbers soared, and bankruptcy and debt relief order figures were higher than in 2022.
“People with lower levels of debt are becoming more aware of alternative options. It can come as a welcome surprise that you don’t always have to choose between an IVA and bankruptcy.
“Cold statistics only reveal so much, though. We are also aware of the time-lag between people facing serious financial difficulties and the release of personal insolvency statistics, so the figures seen in government data may not be a real-time representation of the current hardships faced by many UK households.
“Financial distress and money worries are still serious problems in England and Wales, and the last 12 months have hit many people’s finances hard. Rising bills, food and fuel prices were a major concern and a major expense in 2023, while high inflation forced up interest rates and left a lot of people worrying about the cost of mortgages and loans.
“The good news is that inflation has continued to fall faster than expected. The price of food, energy and fuel are still a worry for many, but there’s light at the end of the tunnel – depending, of course, on events in the increasingly volatile wider world.”
R3 is the trade association for the UK’s insolvency, restructuring, advisory, and turnaround professionals and its Southern & Thames Valley region includes Buckinghamshire, Oxfordshire, Hampshire, the Isle of Wight, Wiltshire, Berkshire, Sussex, Surrey and Kent.
