R3 responds to Q1 2023 insolvency statistics

28 April 2023

• There were 5,747 seasonally adjusted corporate insolvencies in Q1 2023 – a 3.7% fall compared to Q4 2022’s total of 5969.
  • Corporate insolvency levels for Q1 2023 were 17.7% higher than Q1 2022’s figures of 4,884, 142.7% higher than Q1 2021’s total of 2,368, and 36.9% higher than Q1 2019’s total of 4,199.

• There were 29,017 seasonally adjusted personal insolvencies in Q1 2023 – a fall of 1.8% on Q4 2022’s total of 29,534.
  • Personal insolvency levels for Q1 2023 were 9.4% lower than Q1 2022’s figure of 32,011. 2.9% higher than Q1 2021’s figure of 28,194, and 9% lower than Q1 2019’s figure of 31,875.

Nicky Fisher, President of R3, the insolvency and restructuring trade body, responds to the Q1 2023 England and Wales personal and corporate insolvency statistics, which were published today by the Insolvency Service: 

“A small dip in overall corporate insolvency levels doesn't hide the fact that more directors are choosing to shut up shop and more creditors are choosing to chase unpaid debts than 12 months ago. Firms are still struggling as the trading climate remains challenging, and unless the economic picture improves, it's unlikely numbers will drop in the near future.”

“Despite the quarterly fall in numbers, Q1 2023’s corporate insolvency figures are the highest first quarter’s figures for more than a decade and the second-highest overall figures in the same period as firms find themselves caught between spiralling costs and increasing creditor pressures.

“Numbers of Creditors’ Voluntary Liquidations, which are the highest number we’ve seen for a first quarter in more than a decade, are the key driver of this, and reflect the fact that many directors are choosing to close their businesses now while the option is theirs to exercise.

“Compulsory Liquidation numbers are lower than three months ago, but are significantly up on this time last year as creditors make use of the change in winding-up petition legislation to pursue the debts they are owed.

“Alongside these issues, firms are operating in a world of rising costs and falling margins as consumers cut spending right back to the basics – and even then looking to save money wherever they can.

“In this climate, directors need to be vigilant and seek advice at the first sign of issues with their business, or the second they start to worry about it or its finances.  If stock starts to build up, cashflow or bill payments become a concern, or the managers are worried about the business in any shape or form, that’s the time to seek advice.

“Turning to personal insolvencies, while total numbers have fallen quarter-on-quarter and year-on-year, Debt Relief Order (DRO) numbers have risen to levels not seen since the end of 2018, and Bankruptcy numbers are higher than three months ago and a year ago.

“The increase in DRO numbers will largely be down to the fact that people with debts of up to £30,000 can now apply for a DRO, following a change in legislation, with those whose debts are higher than this are entering a bankruptcy in an attempt to resolve their situation.

“Money worries are front of mind for many at the moment, as the price of energy and food, and the current and future health of the economy continue cause concern.

“We’ve also seen household borrowing increase and an increase in people turn to credit to pay their bills. It’s understandable that people are choosing to go down this route, but it isn’t a sustainable one.

“We urge anyone who is worried about their finances to seek advice as soon as possible. Talking about your money worries is one of the hardest conversations you can have, but being brave and speaking to a qualified advisor when your worries are new gives you more time to take a decision about how best to resolve your situation and more potential options as well.

“Most R3 members will give a free consultation to potential clients to learn more about their situation and outline the options for resolving it.”