Company insolvencies up 40% in May

The number of registered company insolvencies in May 2023 has risen 40% compared with May 2022, according to new data from the government insolvency service.

In May this year 2,552 registered companies went out of business compared with 1,825 in May last year.

This is higher than levels seen while the Government Covid support measures were in place and also higher than pre-pandemic numbers.

There were 189 compulsory liquidations in May 2023, up 34% year-on-year.

The number of compulsory liquidations have increased from historical lows seen during the coronavirus pandemic, partly as a result of an increase in winding-up petitions presented by HMRC.

Furthermore, there were 2,181 Creditors’ Voluntary Liquidations which was 38% higher than in May 2022.

The number of administrations and Company Voluntary Arrangements (CVAs) was also higher than in May 2022.

Lindsey Cooper, partner at RSM UK Restructuring Advisory, said: “The number of insolvencies has increased both in comparison to the same period last year but also in comparison to last month.

“This has been fuelled by a rise in CVLs with directors of these companies deciding that they have exhausted all recovery options and have no alternative other than to cease trading. This is not surprising given the high level of debt many businesses have on their balance sheets and the rising costs of servicing this debt.”

She added: ‘With the continued increase in interest rates it is becoming more and more difficult for some businesses to refinance and we expect more failures amongst those businesses which are already in a vulnerable cash position.

“However, it is encouraging to see that more companies are making use of the CVA procedure whereby the company comes to a compromise agreement with its creditors to allow it to carry on trading.”