As we enter the second half of 2024, we’re beginning to see some trends hardening as they follow a consistent pattern.
The latest set of corporate insolvency statistics from The Insolvency Service for July underlines that while month on month business insolvencies have reduced, the medium and longer term trends and increases in certain insolvency procedures continue to rise.
This underlines that the current economic situation, while improving, will take more months to stabilise and see business insolvencies decrease consistently.
The official total of company insolvencies in England and Wales in July saw a total of 2,191 recorded.
This is 7% lower than the 2,361 recorded last month but 16% higher than in July a year ago. This total is also an increase of 8% from July 2022’s total and up 47% from July 2021.
This is also the third highest monthly total recorded this year.
Analysis
Of the 2,191 corporate insolvencies in July, the most frequent kind of process recorded were Creditors’ Voluntary Liquidations (CVLs) with 1,691.
This is down 9% on the previous month but a 15% increase in the total from July 2023. The CVL total makes up 77% of all corporate insolvencies recorded in July, a reduction of 2% from the proportion for the previous four months.
In context, 2023 saw the highest annual number of CVLs since records began in 1960, continuing the year-on-year increases in CVLs since 2021. They had been increasing at approximately 10% a year between 2017 and 2019 before being artificially repressed during the Covid-19 pandemic years.
There were 320 compulsory liquidations recorded, the largest monthly total seen in three years and the third consecutive month it’s increased. It’s an increase of 5% on the previous month and up 27% from the same month a year ago.
Compulsory liquidations grew 44% annually in 2023 from 2022 but still remain 4% lower than their pre-pandemic levels in 2019. Like CVLs they were also artificially restricted in 2020 and 2021 through temporary measures halting recovery procedures.
This is further evidence that HMRC are increasing their pursuit of outstanding arrears by hiring more staff and dedicating more resources to their operations.
They will continue to use statutory demands and winding up petitions to chase outstanding corporation tax, VAT, PAYE or national insurance contributions (NICs).
There were 155 administrations in July which was a 10% reduction from June but a 6% increase on the same month a year ago.
Administrations fell to an 18-year low during the pandemic in 2021 before increasing in subsequent years to levels comparable to those seen between 2015 and 2019.
Company Voluntary Arrangements (CVAs) saw their highest monthly total in over a year with 25 recorded. This was also the fifth consecutive month when the total was greater than the previous month.
This was 9% higher than last month’s total and a 32% increase on the total from July 2023.
Use of CVAs grew 68% in 2023 from 2022 which saw the lowest annual total since 1993 although numbers are still approximately half of 2015 to 2019 levels indicating that they have considerable room to grow even further.
More directors are using the legal protection of administration and CVAs to give them the valuable extra time to restructure their businesses or reduce their debts and manage smaller monthly repayments on the remaining arrears.
No receiverships were recorded in July but two moratoriums were signed off by the High Court. This means that since June 2020, 55 companies had obtained an insolvency moratorium to halt legal actions from creditors while they were restructured and a further 23 had restructuring plans registered at Companies House as required under the Corporate Insolvency and Governance Act 2020.
According to the Companies House register one in 177 companies (56.6 per 10,000) entered insolvency in the 12 preceding months up to and including July 2024. This is another increase from the one in 179 (55.8 per 10,000) seen in June – the second consecutive month this number has grown.
The Insolvency Service produces 12-month rolling rates calculated as a proportion of the total number of active companies which they say highlights longer term trends and tunes out any monthly volatility – although both monthly and rolling numbers have increased.
Scotland
In Scotland last month there were 117 company insolvencies recorded.
This was 21% higher than the number seen in July 2023 and an increase of eight from last month.
This total consisted of 76 CVLs (up from 60 in June); 33 compulsory liquidations (down from 33) and eight administrations (up from six). There were no CVAs or receivership appointments recorded.
Historically, compulsory liquidations have been the most frequent type of company insolvency in Scotland. Since April 2020 however, the number of CVLs have remained higher than numbers of compulsory liquidations.
This ongoing trend shows that Scottish directors and their accountants are being more proactive and taking difficult decisions earlier rather than relying on their creditors to take action and force the closure of their companies.
The total insolvency rate in Scotland for the 12 months up to and including July 2024 was 53.8 per 10,000 companies on the effective register. This was up slightly (0.7) on the preceding 12 months.
Northern Ireland
In July there were 20 company insolvencies registered in Northern Ireland.
This was an increase of three on last month’s total and was 54% higher than the same total a year ago.
The figure consisted of ten CVLs (up from seven); five compulsory liquidations (down from eight); four administrations (up from one) and one CVA (no change). There were no receivership appointments.
The total insolvency rate in the 12 months up to and including July 2024 in Northern Ireland was 40.4 per 10,000 companies on the effective active register. This was a slight increase of 0.3 from last month and an increase of 16.1 from the 12 months to July 2023 – the second consecutive monthly increase.
The total number of company insolvencies for the whole of the UK in July was 2,328 – a decrease of 159.
“The highest figures in July since 2019”
Tim Cooper, President of R3, the insolvency and restructuring trade body said: “Despite a decrease compared to last month, July’s corporate insolvency figures are the highest we’ve seen for this month since 2019, as a result of increases in compulsory liquidation, administration and CVL numbers compared to July 2019 and 2023.
“CVLs continue to be the most common corporate insolvency process, although their numbers have fallen compared to last month and July 2022. These processes are used predominantly by smaller businesses and their increased take-up compared to July of last year and 2019 reflects the challenging trading conditions these businesses have operated in over the past four years.
“Meanwhile, the rise in administration numbers compared to last year is potentially positive for business rescue prospects and highlights the importance of early advice for exploring rescue plans, while the increase in compulsory liquidation figures shows the ongoing financial pressures creditors are facing.
“Recent improvements in market and economic conditions, driven mainly by a successful summer of sport and more stability for businesses following the general election, have led to better trading conditions for retail, hospitality and construction businesses. The construction sector is expected to receive a further boost through the government’s planned housing and infrastructure initiatives, although it will take time for them to have an impact.
“The improved economic and business climate should also result in greater acceptance and success of rescue proposals and businesses of various sizes are showing an interest in restructuring plans, which is positive news.”
With Autumn on the horizon, many businesses will be thinking about what the rest of 2024 holds for them and if a busy next few months might be the key to making it a good one.
But what if you could do something, right now, that would increase those chances?
Well you can! Get in touch with us today and arrange a free initial consultation at a convenient time for you.
You’ll work with one of our advisors and when they get a clearer picture of your business and its financial picture, they’ll be able to give you a full rundown of your viable options and what you can do to implement them.
If you act now then you’ll be able to see results before the leaves fall from the trees.