Construction, retail and hospitality continue to be the worst hit sectors across the economy with the highest number of insolvencies
The number of registered company insolvencies in Q3 2023 fell 2% to 6,208 on the previous quarter, but were still up 10% on last year
There were 6,208 company insolvencies, made up of 4,965 creditors’ voluntary liquidations (CVLs), 735 compulsory liquidations, 466 administrations, 41 company voluntary arrangements (CVAs) and one receivership appointment. The number of insolvencies in Q3 2023 was 10% higher than Q3 2022.
The worst affected sectors were construction, retail and hospitality which has been the trend over the last two years, although only hospitality numbers were on the rise, giving limited relief to business owners in construction and retail.
Gareth Harris, partner at RSM UK restructuring advisory, said: ‘A small drop in insolvencies is a step in the right direction, with the majority of the fall from lower levels of ‘shut down’ creditors’ voluntary liquidations at the smaller end where the catch-up from Covid and government support has been flushed out.
‘Sticky inflation, high interest rates and the cost of living are still making it tough for businesses to recover post-Covid, but we are entering a new phase, as business confidence recovers, we are already seeing an increase in corporate rescues and businesses bought from administration. High debt levels are really starting to bite but there is increased appetite to invest and save those businesses that ought to have a future.
‘The flip side of this is that whilst creditors have been supportive of businesses as they recover post-pandemic, this patience has now run out and the stance on forbearance has hardened, leading to an increase in compulsory liquidations, which points to the need to engage with all stakeholders to find a solution.’
The insolvency figures are dominated by creditors’ voluntary liquidations although the number was down slightly on the previous quarter’s 5,197.
Christina Fitzgerald, past president of R3, said: ‘A combination of rising costs, director fatigue and increased creditor pressure mean more firms are turning to a corporate insolvency process to resolve their financial issues.
‘The key driver of the numbers is the rise in CVLs, which have reached their second highest figure on record and the highest number ever recorded in Q3.
‘After years of battling through the pandemic, supply chain issues, increasing costs, rising inflation and requests for higher wages, many directors have simply had enough and are calling it a day while that choice is still theirs.
‘Compulsory liquidation numbers have reached a four year high – partly because of legislation preventing them and then making the winding-up petition threshold higher in the aftermath of the pandemic, but also because these firms are now under their own pressures, and are calling in debts in the hope of balancing their own books.’