A perfect storm of economic struggles and a covid hangover have forced annual corporate insolvency figures into a 14-year high, with record numbers of businesses now turning to an insolvency process to help resolve significant financial issues.
This is according to the Midlands branch of insolvency and restructuring body R3 and follows latest statistics published by the Insolvency Service which show that corporate insolvencies in England and Wales increased by 6.4% in November 2023 to a total of 2,466 compared to October’s total of 2,317, and by 21.4% compared to November 2022’s figure of 2,032.
Corporate insolvencies have also risen by 47.1% from November 2021’s total of 1,676 and by 63.9% compared to the pre-pandemic figure of 1,505 in November 2019.
R3 Midlands chair Stephen Rome, a partner at the Midlands office of Penningtons Manches Cooper, said: “These latest numbers have been driven by an increase in Creditors’ Voluntary Liquidations and Compulsory Liquidations, as more directors opt to close their businesses while that choice is still theirs. At the same time, creditors are pursuing debts to balance their own books.
“Notably, the figures published this month take 2023’s corporate insolvency figures to the highest annual total since 2009. This 14-year high is due to insolvency numbers being supressed by Government covid support measures and a relay of economic issues impacting heavily on businesses.
“Since the spring of 2020, firms have had to contend with the pandemic, the end of Government financial support, rising inflation, the cost-of-living crisis and supply chain issues – all with no time to draw breath and recover.
“The past year has been especially tough. Costs have increased, people have been reluctant to spend money as they worry about paying for the basics, and high interest rates have made paying debts or securing funding incredibly difficult.
“This point of the year is a critical time for many businesses, and if it doesn’t deliver the rise in revenues many are hoping for, we could see insolvency numbers increase further next month.
“Given the timing and climate, it’s vital that directors and managers are alert to signs their business could be financially distressed and seek advice as soon as possible. It’s a very hard conversation to have, but speaking up when worries are new can provide more options for recovery, as well as more time to consider how to move forward.”
