Company insolvencies continue steady climb above pre-pandemic rate
31 October 2023
By Matt Jukes
The annual rate of total company insolvencies in England and Wales is now 42% higher than before the pandemic and looks set to continue to steadily rise, a Recovery News analysis of this month’s statistics shows.
In the 12 months to October 2023, there were 24,322 company insolvencies recorded (an average of 2,027 per month), according to the figures from the Insolvency Service.
The steady rise in the rate of company insolvencies sets England and Wales to be on track to reach the highest number since 2009, said David Kelly, head of insolvency at PwC.
Kelly added: “The challenging economic climate continues to impact companies across a range of sectors. Construction is being particularly hard hit, suffering more insolvencies than any other sector, while retail and hospitality and leisure continue to struggle. Indeed, restaurant closures have sadly reached the highest level in a decade.
“Although the recent pause in interest rates is welcome news for businesses needing to refinance their loans, it will still be more expensive to do so and the process is likely to be more difficult, which will have an impact on both cash flow and profits. Unfortunately, it’s therefore likely that the number of companies falling into insolvency will remain high over the coming months.”
Nicky Fisher, R3 president said: “It’s clear that the challenging trading climate is taking its toll on businesses. Firms are operating in a climate where people are cutting back their spending on non-essential items, while at the same time the costs of operating a business remain high – and will only increase as the weather gets colder and the cost of borrowing and servicing existing debts get more expensive.”
The rate of total company insolvencies in Scotland has also continued to surpass pre-pandemic levels albeit with a recent fall off. It is unclear at the moment if this is a temporary change in the trend.
There were 1,146 company insolvencies recorded in the 12-months to October 2023, 11% higher than the first available 12-month period recorded in 2019.
Iain Fraser, chair of R3’s Scottish technical committee said: “The year-on-year rise in corporate insolvencies has been driven by an almost 35% rise in compulsory liquidations. This increase suggests that, faced with financial challenges of their own, more and more creditors are now increasing their efforts to pursue debts they are owed to meet their own financial obligations.
“Times remain tough for Scottish businesses. Inflation is still a big worry for many. Prices are going up, and businesses are struggling to reasonably pass on these extra costs to customers. As we head into the colder months and energy bills rise, these increased costs are only set to exacerbate current challenges, particularly for higher risk sectors like hospitality and retail.
“Business owners are also feeling the squeeze from the recent rise in the corporate tax rate to 25%. With a higher tax burden, profitability takes a hit and less money is left to invest in growth or put away for more challenging times – both of which add unwelcome additional pressure.”
Company Insolvencies in Northern Ireland have bucked the trend, remaining below pre-pandemic levels over a 12-month period, but saw a large spike for September 2023 also by an unusually high number of compulsory liquidations driven by a large rise in winding-up petitions by HMRC.
