The Insolvency Service have just released their final revised figures for corporate insolvencies from Q2 of this year – all activity between April 1st and June 30th inclusively – and it contains some significant headline data. 

The first is that there were 6,342 seasonally adjusted company insolvencies in England and Wales which is the highest in a three month period in over 14 years – since Q2 2009. 

This is 13% higher than the same period a year ago in 2022 and 9% higher than in the first three months of 2023. This also means that the number of active companies going into liquidation was one in 192 (52.0 per 10,000 active companies which is an increase from the 43.9 per 10,000 a year ago). 

The total of 6,342 was comprised of:-

  • 5,240 creditors voluntary liquidations (CVLs)

CVLs accounted for 83% of all company insolvencies with the total of quarterly CVLs at their highest ever levels since quarterly statistics started being recorded in 1960. They have increased 7% on Q2 2022 and are up 9% from Q1 2023. 

  • 637 compulsory liquidations

Compulsory liquidations were 5% lower than the previous quarter but are 67% higher than the same period a year ago. The numbers have increased from the record lows seen during the pandemic period when statutory demands and most winding up petitions were suspended by the government. 

  • 409 administrations

Administrations rose by 30% on the first three months of the year and have increased by 34% on the same period from a year previously. Administrations reduced to their lowest total in 2021 for twenty years before returning to their pre-pandemic levels, as compulsory liquidations have also done. 

  • 56 company voluntary arrangements (CVAs)

We’ve previously written about how CVAs have returned and these statistics bear this out. While still below historical levels, they are 47% higher than in the first three months of the year and 75% higher than from Q2 2022. 

  • There were no receivership appointments

There have been no receivership appointments recorded in over a year since one in Q2 2022. 

Which industrial sectors are under the most pressure?

Looking at the 12 months from June 30th 2022 to June 30th 2023, we can have a snapshot of what industries are facing tough times. 

The five most populous industrial sectors for insolvencies are:-

  • Construction – 4,262
  • Retail – 3,695
  • Hospitality – 3,262
  • Administrative and support services – 2,222
  • Manufacturing – 1,874

“Businesses are running out of road and rope”

Nicky Fisher, President of R3, the UK’s insolvency and restructuring trade organisation, said: “Corporate insolvencies have hit a 14-year high this quarter – and this is due to a rise in creditors voluntary liquidations, administrations and company voluntary arrangements. 

“Although compulsory liquidations have fallen compared to the last quarter, numbers for this process are the highest we’ve seen in the second quarter of the year since 2019. 

“More and more businesses are running out of road or rope. 

“Directors are choosing to close down their firms while the decision is still theirs, while an increasing number of creditors – including HMRC – are turning to winding up petitions to recover the debts they’re owed.

“When the pandemic ended, many directors thought and hoped things would improve, but instead they’ve faced rising costs, supply chain issues and a customer base that is tightening its purse strings to cope with the cost of living. 

“Business Owners remain worried about customer demand, rising costs and the state of the economy, while high interest rates may affect access to rescue funding and could deprive saveable firms of a lifeline. 

“Unless the economic picture improves, it’s likely more businesses will need an insolvency process to help resolve their financial issues and numbers will remain high throughout the rest of this year.”

These historically high insolvency figures would be a cause for concern under normal circumstances but given the increasingly stubborn high inflation and likely increasing interest rates, it should be even more concerning for business owners and directors. 

This is why we offer a free, initial consultation for them to understand what options they have to move their business forward and hopefully to a stronger position for the rest of 2023.