R3 responds to March 2024 insolvency statistics

26 April 2024

• Corporate insolvencies decreased by 16.6% in March 2024 to a total of 1,815 compared to February's total of 2,177, and decreased by 17.2% compared to March 2023's figure of 2,193.
  • Corporate insolvencies decreased by 2.2% from March 2022's total of 1,856 and increased by 14.8% compared to pre-pandemic levels in March 2019 (1,581).
• Personal insolvencies decreased by 18.9% in March 2024 to a total of 8,708 compared to February's total of 10,740, and decreased by 9.3% compared to March 2023's figure of 9,598.
  • Personal insolvencies decreased by 8.5% from March 2022's total of 9,514 and decreased by 28.7% compared to pre-pandemic levels in March 2019 (12,216)

Tim Cooper, President of R3 and a Partner at Addleshaw Goddard LLP, comments on the publication of the March 2024 corporate and personal insolvency statistics for England and Wales:

“The biggest driver of the monthly and yearly fall in corporate insolvency numbers is a reduction in Creditors’ Voluntary Liquidations. However, numbers for this process and overall levels of corporate insolvency are still higher than they were pre-pandemic.

“High costs and constrained spending have continued to hit businesses hard in the first three months of this year. The latest available sectoral data shows that construction is currently the industry experiencing the highest levels of insolvency, and the figures for this sector for November 2023-January 2024 are slightly higher than they were in the same period last year. This is because insolvency numbers have increased amongst firms working on the construction of residential and non-residential buildings, as well as in specialist construction activities.

“I would suggest that the main drivers of this are the delays in construction starts in the three months to October of last year, which will have affected the main contractors and those specialist construction firms whose work takes place in the later stages of construction projects. These specialist firms are also vulnerable to impacts of delayed start times and of the cost of materials. There were also a number of high profile construction sector insolvencies in that period, and the cascade-effect can take a while to impact on the supply chain into this sector.

“While the wider trading climate is a challenging one, there are signs directors expect revenues to increase this year, and this suggests the mood among the business community is becoming more positive. However, it remains to be seen whether inflation falls quickly enough to benefit businesses, and whether the hoped-for increases in income outstrip potential rises in costs and wages.

“Directors need to be alert to the signs their business is distressed, and act on any indications it might be as soon as they present themselves. Cashflow issues, increases in stock, and problems paying taxes or invoices are all signs a business is financially distressed, and the quicker these are acted upon and professional advice sought, the greater chance there is of the situation improving.

“Turning to personal insolvencies, the monthly and annual fall in numbers – to the lowest figure we’ve seen in March since 2020 – is driven by a reduction in the number of people entering a Debt Relief Order and an Individual Voluntary Arrangement. Breathing Space numbers have also fallen compared to last month and last year, but a significant number of people are still using this process to seek advice and attempt to find a solution to their financial issues.

“Despite the fall in personal insolvencies seen in the statistics published today, the cost of living crisis and paying for basic expenses continue to be issues for consumers. Food, fuel, heating and housing costs have all remained high, and people are cutting discretionary spending to make sure enough money is left to pay for the essentials. The future of the economy and the security of people’s finances remain key areas of concern, and many people are shying away from making major purchases as they look to save wherever and whatever they can.

“This situation isn’t expected to change soon – and with household debts increasing, unemployment rising and real post-tax household income not expected to return to where it was before the pandemic until the end of next year, times will remain tight for many.

“We urge anyone who is worried about their finances to seek advice at the earliest possible opportunity. Money and money worries are two of the hardest topics to start a conversation about, but doing so at an early stage gives you more potential options and more time to take a decision about your next step than if you’d waited until the problem became more severe.

“Most R3 members will offer a free consultation to prospective clients so they can understand more about their circumstances and outline the potential solutions open to them to improve or resolve them.”