R3 responds to September 2024 insolvency statistics

18 October 2024

• Corporate insolvencies increased by 1.5% in September 2024 to a total of 1,973 compared to August's total of 1,943, and decreased by 7.4% compared to September 2023's figure of 2,130. 
  • Corporate insolvencies also increased by 14.3% compared to September 2022 (1,726).
• Personal insolvencies increased by 6% in September 2024 to a total of 10,651 compared to August's total of 10,046, and increased by 44.5% compared to September 2023's figure of 7,372. 
  • Personal insolvencies also increased by 12.6% compared to September 2022 (9,462).

Tim Cooper, President of insolvency and restructuring trade body R3, and a Partner at Addleshaw Goddard LLP, says:

“Although corporate insolvencies have only risen by a small percentage compared to last month, the business climate remains difficult as firms face a multitude of issues including ongoing cost challenges, uncertainty around announcements in the Budget and the potential knock-on effects of the conflict in the Middle East.

“Firms are worried about the impact future tax rises could have on their bottom lines, and members are telling us that there’s an increased demand for advice and support around Member Voluntary Liquidations as directors look to take steps to reorganise their business and its finances ahead any potential tax changes in the Budget. 

“The conflict in the Middle East will likely affect UK businesses. Increased instability in the region could disrupt trade routes and supply chains, affecting businesses that rely on imports or exports from the Middle East. Businesses will have to weigh up whether they pass any cost increase onto customers or absorb it themselves. This is particularly relevant for sectors like energy, manufacturing, and retail.

“In terms of the figures, the marginal monthly increase in corporate insolvencies is due to an increase in Creditors’ Voluntary Liquidations and Administrations, while the year-on-year reduction in numbers is due to a fall in Creditors’ Voluntary Liquidations and Compulsory Liquidations.

“These figures also show that Administration numbers have increased compared to last month and this time last year. This suggests directors are seeking early advice, which is something R3 has been campaigning for since 2020. Seeking early advice means there are more businesses that have the potential to be rescued via a sale out of Administration – the preferred outcome of an Administration process for members of the profession, who always seek to rescue a business wherever this is possible. 

“If directors are proactive at seeking advice when the first signs of financial distress present themselves, we could see CVL numbers reduce in the medium-term and more businesses entering administration in the hope of being rescued through a sale.

“Despite these issues, there has been some positive news for certain key sectors of the economy, with news of construction output increasing, retail sales volumes continuing to rise in August and consumers spending more in the hospitality sector last month. Firms in these sectors have had a challenging year and they will be hoping this is the prelude to a strong finish to 2024.

“Turning to personal insolvencies, the monthly increase is due to a sharp increase in Individual Voluntary Arrangement (IVA) numbers, while the year-on-year increase is due to a rise in IVAs and Debt Relief Order (DRO) numbers – the latter of which can be attributed to the removal of the administration fee for DROs which was introduced in April of this year and the increase in the debt threshold for this process which was introduced in June.

“It’s important to note that the figures published today do not include the Breathing Space numbers for September 2024, and without them it’s hard to get a full picture of the demand for debt advice and support for this month.

“Despite this, it’s clear money worries continue to weigh heavily on consumers, with the health of the economy and their personal finances, and the costs of housing, fuel and energy front of mind for many.

“Wherever they can, people are looking to save money – looking for bargains on their weekly shop and currently only spending small amounts on treats or non-essentials – and are reluctant to make major purchases as they attempt to save or manage their expenses.

“There will be some hope that the surprising fall in inflation to 1.7% for the first time in a long time may give some interim relief for household budgets. Homeowners in particular may be seeking to benefit from a competitive mortgage market for better fixed rate mortgages, and hoping that this surprising inflation figure is a prelude to further interest rate cuts. However, any optimism would be cautious, as the initial reactions to the inflation figures indicate that there is an expectation they will increase by the end of the year.

“Our advice to anyone who is worried about their finances is to seek advice as soon as possible. Don’t wait for the situation to become more serious – if you delay seeking advice, you’ll have fewer potential solutions to your issues, and less time to take a decision about your next step.

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