Corporate insolvency numbers are also higher than they were before and during Covid
June might have been the month of distractions with a general election campaign in full swing and Scotland’s fans winning hearts and minds in Euro 2024 while the team tried to overcome injuries and a tough draw.
Which is why the latest corporate insolvency statistics from The Insolvency Service for June are a surprise because a lot more companies were busy entering an insolvency process than expected across the UK.
In Scotland last month there were 109 company insolvencies recorded.
This was nine fewer than the total from May which in itself was the highest monthly number recorded in the past five years. This was also 4% lower than the total from June 2023.
This total consisted of 60 CVLs (down from 71 in May); 43 compulsory liquidations (no change) and six administrations (up two). There were no CVAs or receivership appointments recorded in June.
In Scotland compulsory liquidations have traditionally been the most frequent insolvency process but since April 2020 and Covid-era restrictions being applied, they have been overtaken by CVLs.
This shows how proactive Scottish directors and their accountants are in making difficult decisions and acting decisively before their creditors make the decision for them.
The total insolvency rate in Scotland in the 12 months up to and including June 2024 was 53.1 per 10,000 companies on the effective active register. This was down 0.6 from the preceding 12 months ending in June 2023.
The main key takeaway is that Scottish insolvencies are and remain at a higher rate than they were before and during the Covid-19 pandemic and subsequent recovery period.
The total number of company insolvencies for the whole of the UK in June was 2,487 – an increase of 319 from last month.
“Creditors are taking a much tougher stance this financial year.”
Tom Russell, Vice President of R3, the insolvency and restructuring trade body said:
“The monthly and yearly increase in UK-wide corporate insolvencies is driven by an increase in creditors’ voluntary liquidations (CVLs) – a process usually used by smaller businesses and which is often driven by cash flow problems or difficulties with access to finance.
“Compulsory liquidation numbers have also risen to their second highest level since January 2021 and suggests that creditors are taking a much tougher stance this financial year.
“There are some positive signs in the figures – CVAs and administration numbers have increased compared to last month, and administration numbers are higher than this time last year and in June 2019.
“Insolvency professionals will always try to rescue businesses whenever they possibly can and this trend suggests that there are an increasing number of businesses for whom this is an option and whose secured creditors are willing to support rescue proposals.
“The reality is that businesses are still trading amidst high costs and cautious consumer spending, and despite recent more encouraging data pointing to increasing growth and falling inflation, the trading environment is still challenging for many businesses, and it seems that the economic improvement has come too late for some.
“While retail sales rebounded in May, they are still down year-on-year and restaurant spending fell again last month as consumers continued to be cautious with discretionary spending to save money.
“These sectors have struggled since the start of the year and have yet to bounce back from a disappointing pre-Christmas trading period, so we may see insolvency numbers increase in the Autumn if trading conditions don’t improve.
“The statistics show that levels of CVLs have been high for some time now. The new government has committed to a number of new policies during the General Election campaign which are designed to boost the business community – especially SMEs.
“Their pledge to reform business rates to be fairer may benefit businesses in the retail and hospitality sector, while plans to introduce legislation to tackle late payments, if effective, will improve cash flow for businesses and free up resources that will potentially allow firms to focus on investment and growth instead of chasing money they are owed and managing cash flow. These measures will take time to introduce and may come too late to help those who are currently struggling.
“It’s also worth noting that many businesses continue to be optimistic about the future, with lower inflation and the prospect of higher sales and profits boosting their confidence about the coming months, but we’ve yet to see the full impact of the General Election on the economy and purchasing decisions, and despite their optimism about the future, organisations remain concerned about customer demand, staff turnover and meeting their regulatory requirements.”
Last week’s King’s Speech saw several policies unveiled that will affect businesses of all sizes all over the UK.
The Scottish Parliament will also have some new legislation in the pipeline but with uncertainty growing about the future of capital gains tax and other measures ahead of the new chancellor’s first Autumn budget, the time to get some professional advice is really now.
There will inevitably be delays to new policies and their effects feeding through so you do have some time to implement decisions to improve your company’s fortunes before it becomes too late to change course.
Get in touch with us today and arrange a free initial consultation at a convenient time for you.
There are still five and a half months left in 2024 – plenty of time to make it a real year to remember for you and your business – but only if you act while you can.