The number of corporate insolvencies has surpassed pre-pandemic levels, with 2,002 in December 2023, up from 1,965 on the previous year
The total company failures for 2023 exceed 25,000 for the first time in 15 years, signalling the toughest business climate since the economic crash in 2009.
Before the first lockdown in 2020, there were 1,119 company insolvencies in December 2019, one year later the figure was slightly higher at 1,235.
However, typically for December the overall level was down on November’s 2,470. What is most worrying that the figure was the highest for four years.
Lin Gartland, restructuring & insolvency director at Azets, said: ‘Despite the monthly decrease in corporate failures, in total in 2023, they are at their highest level since the aftermath of the financial crisis in 2009.
‘We expect that fallout from the impact of large corporate failures in the construction industry will continue, and early indications are that the Christmas trading period was quieter than hoped, increasing the pressure on leisure and hospitality businesses, where we expect further insolvencies in the coming months.’
Out of the 2,002 insolvencies last month, there were 1,731 creditors’ voluntary liquidations (CVLs), 153 compulsory liquidations, 103 administrations and 15 company voluntary arrangements (CVAs).
Nicky Fisher, president of R3, said: ‘The figures published are the highest for December in four years and reflect the final month of a difficult year for businesses in England and Wales.
‘December was tough for many firms as they faced additional expenses at a time when margins were already tight. These won’t have been helped by consumer spending slowing and rising energy costs.’
The tough economic environment and high interest rates have dented business confidence and are having an impact on the monthly figures.
Gareth Harris, partner at RSM UK Restructuring Advisory said: ‘It is disappointing, but probably not surprising that insolvency levels remain high.
‘The uptick in insolvencies demonstrates clearly how many businesses across many sectors are struggling financially and what a tough trading environment they are facing. However, it’s promising to see liquidations and administrations slowing.
‘With continuing economic uncertainty and such low growth, it looks like it will be a tough 2024 for many, and it could be the end of the year before we see any real reduction back towards more “normal” levels of monthly insolvencies.’
Falling inflation is raising hopes that interest rates will be reduced earlier than expected, although economists do not expect cuts until mid-year.
‘Although interest rates appear to have stabilised, property related businesses are still feeling the pressure and are being forced to make tough decisions. Taking early advice is key to avoiding a terminal process such as liquidation,’ added Gartland.