New and novel diseases pop up all the time, as we’re all too aware over the past couple of years, but what about “director fatigue?” 

Running a business is tough but recent evidence shows that many directors and business owners are or have reached their personal and professional limits. 

In the latest set of official monthly corporate insolvency statistics, Christina Fitzgerald, president of R3, the UK’s insolvency and restructuring trade body, highlighted that after years of battling through the pandemic and dealing with supply chain issues and increasing costs across the board, many directors have “simply had enough and are calling it a day”.

She said: “A combination of director fatigue, rising costs and increased creditor pressure means more firms are turning to insolvency procedures to resolve their financial issues.

“Many are quitting while that choice is still theirs”. 

The figures back up that these are certainly turbulent conditions for many businesses that had come through the pandemic years and could reasonably have expected that things might have got easier. 

Overall company insolvencies are at their highest levels since the peak of the global financial crisis in 2009 while the number of creditors voluntary liquidations (CVLs) have reached their highest ever totals since 1960, when these statistics were first collected. 

Chris Horner, insolvency director with BusinessRescueExpert said: “The monthly, quarterly and annual corporate insolvency statistics put out from the insolvency service are incredibly useful if you’re trying to get a snapshot of the general health of the country’s economy. 

“All the data we’re receiving shows that warning lights are still flashing red. 

Compulsory liquidations are at their highest number in four years too as all legislation preventing them has expired and companies under their own pressure are doing everything they can to recoup debts to help make their own balance sheets more resilient.

“Trading conditions remain tough. Customers are worried about money and reluctant to spend on anything beyond the basics and even then are looking for the best deals all the while against rising costs in seemingly every direction. 

“The pandemic fallout that hit smaller businesses first is now reaching into the middle of the market as these businesses are facing the same issues – high interest rates and inflation, repayment of pandemic support including bounce back loans and higher refinancing costs and requirements. 

“This year’s Christmas period is going to be crucial for so many companies. 

“All businesses but especially those in retail and hospitality will be hoping that this will be the shot in the arm required to go into 2024 in a position of strength rather than limping into January.”

Directors’ disqualifications are climbing

Another contributing factor to directors deciding to close down their businesses and get out while they can is the increasing number of directors’ disqualifications

Along with the increase in insolvencies, the number of directors running into difficulties with HMRC is also on the rise. 

One example is misuse of the bounce back loan scheme which has seen an estimated £1.1 billion lost to fraud and error alone. 

Some 450 directors were disqualified by the Insolvency Service between 2022 and 2023 for this offence alone.

Last year saw 38 directors per month being disqualified on average with this year’s monthly average reaching 63 with a total of 438 directors being disqualified for Covid finance abuse between April and October 2023.  This accounts for 67% of all disqualifications. 

During the previous decade the number of annual directors’ disqualifications was averaging 1,238 a year and it’s reasonable to assume that this year’s final total could approach this. 

Chris Horner said: “As the government presses hard to recoup losses and show they are taking action against the most high profile bad actors, directors might be surprised to receive letters about their bounce back loans in the coming months and it’s important that they don’t panic. 

“If they have acted in good faith at all times then it will be straightforward enough to prove it but they can help set their fears aside by getting some professional guidance and advice.”

While every business owner and director hopes that 2024 will provide a fresh start for their business, problems have a nasty habit of following businesses around until they’re dealt with. 

We offer a free consultation with an expert advisor to discuss any ongoing issues they’re having trouble dealing with or if any new financial difficulties emerge to derail the new year before it even begins in earnest. 

After speaking with us, they will have a clearer idea of the options available to them and how to implement them to give themselves the strongest launchpad possible – but only if they take the first step and get in touch first.