With the clocks going back this coming weekend, it’s the right time to have a look back at the latest corporate insolvency figures from The Insolvency Service that cover last month’s activity.
The total number of company insolvencies in England and Wales in September saw a total of 1,973 recorded.
This is 7% lower than last September’s total but 2% higher than the total from August and higher than any other September from 2014-2019 and the Covid-19 era from 2020 to 2022.
Analysis
Of the 1,973 corporate insolvencies in September, the most frequently occurring processes were Creditors’ Voluntary Liquidations (CVLs) with 1,575.
This is also a 2% increase on the previous month’s total but is 9% lower than the same period 12 months ago.
CVLs make up 80% of all corporate insolvencies recorded in September, an increase of 1% and the highest proportion for over five months. CVLs had been increasing at approximately 10% a year between 2017 and 2019 before the pandemic artificially repressed those levels.
This partly explains why 2023 saw the highest annual number of CVLs in a year since records began in 1960.
There were 226 compulsory liquidations recorded in September, which was 18% on last month’s total and down 13% from September 2023.
Like CVLS, compulsory liquidations increased by 44% in 2023 after being restricted during the pandemic due to the temporary halt of recovery procedures but are still approximately 4% lower than their pre-pandemic levels.
With HMRC continuing their crackdown on outstanding arrears with more staff and resources being allocated, expect this number to rise by using statutory demands and winding up petitions to chase overdue and owed corporation tax, VAT, PAYE and National Insurance Contributions (NICs).
There were 155 administrations in September which was a 40% increase on August’s total and a 19% increase from the same month a year ago. Despite falling to 18-year lows during the pandemic period, administration levels are roughly at their comparable pre-pandemic levels.
17 Company Voluntary Arrangements (CVAs) were recorded in September which was a reduction of 15% (three) from the previous month but 55% higher than the same month in 2023.
CVAs increased by 68% annually in 2023 from their lowest total since 1993 although numbers are still approximately half those seen between 2015 and 2019 so can be expected to grow further.
This is because more directors are deciding that they’ll explore the options and legal protections that CVAs and administration give them to reduce their debts and restructure their business and finances rather than go straight to a liquidation process.
There were no receivership appointments in September and no moratoriums or restructuring plans registered at Companies House. Since June 2020, 57 companies have obtained an insolvency moratorium to pause legal actions from creditors while they restructured and a further 30 had their restructuring plans registered at Companies House as required under the Corporate Insolvency and Governance Act 2020.
According to data from the Companies House register one in 182 companies (at a rate of 55.0 per 10,000 companies) entered insolvency between 1 October 2023 and 30 September 2024.
This was a decrease from the 55.8 per 10,000 companies that entered insolvency in the 12 months ending 30 September 2023.
The Insolvency service produces 12-month rolling rates calculated as a proportion of the total number of active companies which they say highlights the longer term trends and tunes out any monthly volatility – although both monthly and rolling numbers have increased.
Scotland
In Scotland last month there were 73 company insolvencies which was a decrease of 16% from August.
This total consisted of 48 CVLs (down from 56 in August); 18 compulsory liquidations (down from 42) and seven administrations (up from two). There were no CVAs or receivership appointments.
Between 26 June 2020 and 30 September 2024, there were two restructuring plans in Scotland and no moratoriums.
Scotland has historically seen more compulsory liquidations than any other kind of insolvency process but since April 2020, CVLs overtook them and have remained higher ever since.
This shows that more Scottish directors and their accountants are being proactive and taking difficult but practical decisions earlier rather than relying on their creditors to take action themselves and force the closure of their companies.
The total insolvency rate in Scotland in the 12 months up to and including September 2024 was 52.5 per 10,000 companies on the effective register. This was down by 1.6 from the preceding 12 months ending September 2023.
Northern Ireland
In September, there were 28 company insolvencies registered in Northern Ireland. This was seventeen higher than last month although 24% lower than in September 2023.
The total number of company insolvencies was made up of ten CVLs (up one); 15 compulsory liquidations (up from one); two administrations (up from zero) and one CVA (no change). There were no receivership appointments.
There was one moratorium in Northern Ireland between 26 June 2020 and 30 September 2024 and no restructuring plans.
The total insolvency rate in the 12 months up to and including September 2024 in Northern Ireland was 38.3 per 10,000 companies on the effective register. This is an increase of 12.5 from the 12 months to September 2023.
The total number of company insolvencies for the whole of the Uk in September was 2,074 – a monthly increase of eight.
“The business climate remains difficult”
Tim Cooper, President of R3, the insolvency and restructuring trade body said: “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 of 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 and 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 CVLs 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 means more businesses have the potential to be rescued via a sale out of administration – the preferred outcome when it’s possible to rescue a business.
“If more directors are proactive at seeking advice when the first signs of potential 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.
“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.”
And so say all of us.
Many businesses might be considering battening down the hatches ahead of an uncertain Budget and festive period to follow but no matter what challenges are facing your business, there are positive changes you can make that can provide results you could see before the Christmas lights go up.
Get in touch with us today to arrange a free initial consultation with one of our expert advisors.
Once they get a clear picture of your business and circumstances, they’ll be able to give you a tailored series of options that are applicable and appropriate for you and your business goals.
The sooner you arrange a convenient chat, the sooner you can implement changes that will benefit you not just now but into 2025 and beyond too.