R3 responds to June 2024 insolvency statistics

19 July 2024

• Corporate insolvencies increased by 15.7% in June 2024 to a total of 2,361 compared to May's total of 2,040, and increased by 17.1% compared to June 2023's figure of 2,016. 
  • Corporate insolvencies increased by 49.5% from June 2022's total of 1,579 and increased by 61.1% compared to pre-pandemic levels in June 2019 (1,466).

• Personal insolvencies increased by 10.7% in June 2024 to a total of 10,395 compared to May's total of 9,394, and increased by 32.9% compared to June 2023's figure of 7,819. 
  • Personal insolvencies increased by 5.8% from June 2022's total of 9,825 and increased by 6.9% compared to pre-pandemic levels in June 2019 (9,721).

Tom Russell, Vice President of R3, the UK’s insolvency and restructuring trade body, comments on the publication of the June 2024 insolvency statistics:

“The monthly and yearly increase in corporate insolvencies is driven by an increase in Creditors’ Voluntary Liquidations – a process usually used by smaller businesses, and which is often driven by cashflow problems or difficulties with access to finance. Compulsory liquidation numbers have also risen to their second-highest level since January 2021 and suggests that creditors are taking a much tougher stance this financial year.

“But there are some positive signs in today’s figures – Company Voluntary Arrangement and Administration numbers have increased compared to last month, and Administration numbers are higher than this time last year and in June 2019. The profession will always try to rescue businesses wherever it possibly can, and this trend suggests that there are an increasing number of businesses for whom this is an option and whose secured creditors are willing to support rescue proposals.

“The reality is that businesses are still trading amidst high costs and cautious consumer spending, and despite recent more encouraging economic data pointing to increasing economic growth and falling inflation, the trading environment is still challenging for many businesses, and it seems that the economic improvement has come too late for some. 

“While retail sales rebounded in May, they are still down year-on-year, and restaurant spending fell again last month as consumers continued to be cautious with discretionary spending to save money. These sectors have struggled since the start of the year and have yet to bounce back from a disappointing pre-Christmas trading period, so we may see insolvency numbers increase in the Autumn if trading conditions don’t improve.  

“There was positive news for the construction sector, which saw growth in May after a disappointing start to 2024 and a delay in new work at the end of last year. While the uncertainty the General Election will have brought this sector is likely to impact firms and output in the short-term, the new Government’s pledges to invest in infrastructure and encourage housebuilding could reinvigorate two key markets for this industry if they come to fruition.

“The statistics show that levels of CVLs have been high for some time now – CVLs are typically the insolvency procedure used by SMEs. The new Government has committed to a number of new policies during the General Election campaign which are designed to boost the business community – especially SMEs.

“Their pledge to reform business rates to be fairer may benefit businesses in the retail and hospitality sector, while plans to introduce legislation to tackle late payments, if effective, will improve cashflow for businesses and free up resources that will potentially allow firms to focus on investment and growth instead of chasing money they are owed and managing cashflow. These measures will take time to introduce and may come too late to help those who are currently struggling.

“It’s also worth noting that many businesses continue to be optimistic about the future, with lower inflation and the prospect of higher sales and profits boosting their confidence about the coming months, but we’ve yet to see the full impact of the General Election on the economy and purchasing decisions, and despite their optimism about the future, organisations remain concerned about customer demand, staff turnover and meeting their regulatory requirements.

“June 2024 saw a shift in demand for debt and personal insolvency support, with total personal insolvency numbers rising month on month and year on year, while Breathing Space numbers fell. The main driver of the increase in personal insolvencies is an increase in Debt Relief Order (DRO) numbers, which hit their highest level since January 2021 following the removal of the entry fee in April, and Individual Voluntary Arrangement numbers which are up month-on-month and year-on-year. I would expect DRO numbers to increase again next month, as the changes to the amount of debt you can enter a DRO with took effect from June 28^th.

“The cost of living is still hitting people hard with prices remaining high even as the annual rate of inflation falls to a more typical level. The price of food, fuel and energy remains an issue for many, and consumers remain worried about the future of the economy, reluctant to make major purchases and cautious with their discretionary spending.

“Although inflation and food inflation are falling and a new energy price cap and the warmer weather will likely lead to a drop in energy bills, people have yet to see the financial benefits of these, or of the overall improvement in the economy.

“We know how hard it is to have conversations about money, but we urge anyone who is worried about their finances – business or personal – to seek advice from a qualified source as soon as possible. Being brave and having the conversation while your concerns are new gives you more options and more time to take a decision about your next step than if you’d waited until the situation had worsened.

“Most R3 members will give potential clients a free consultation so they can learn more about their situation and advise them on the potential options open to them for addressing it.”