July sees slowdown in UK insolvencies
Numbers of compulsory liquidations have increased from historical lows seen during the pandemic, partly as a result of an increase in winding-up petitions presented by HMRC
The number of registered company insolvencies dropped 6% to 1,727 in July 2023 compared with 1,831 in July 2022, according to data from the Government Insolvency Service.
Furthermore, the number of Creditors’ Voluntary Liquidations (CVLs) in July was 17% lower than in July 2022 and 24% lower than June 2023.
By contrast the number of administrations and Company Voluntary Arrangements (CVA’s) have increased by 53% and 280% from July 2022 respectively.
The number of insolvencies is still well above the pre-covid long term historic average.
However, the latest figures suggest that the level of shut down CVLs may have peaked in the last six months.
Despite this there were 248 compulsory liquidations in July 2023, up 81% year-on-year.
Numbers of compulsory liquidations have increased from historical lows seen during the pandemic, partly as a result of an increase in winding-up petitions presented by HMRC.
Lindsey Cooper, partner at RSM UK Restructuring Advisory, said: ‘These figures are not unexpected and are in line with our predictions. The fall in CVL numbers reflects the fact that many of the insolvencies at the smaller end are being flushed out of the system.
“The significant increase in administration and CVA numbers shows that larger companies, many of whom have high levels of debt and up until now have been able to withstand the economic and financial challenges, are now having to deal with the impact of high interest rates, as well as the continuing sticky inflation around wages.”
Colin Haig, head of restructuring at Azets, added: “Liquidations have continued at a rate of almost double throughout 2023. The long-term trend in business failures will continue to tick upwards despite the total number of insolvencies dipping last month – but most concerning is the number of compulsory liquidations.
“Liquidation is an end-of-life process and too many business owners are failing to react quickly enough to signs of distress, leaving them unable to take advantage of more constructive options.My advice to businesses is to face up to problems before an insolvent liquidation becomes the only option, and while capital is still available.”
