But watch this space…
Several years ago, there used to be a genuine summer shutdown in the UK for several industries when factories and offices would unilaterally close for up to a month or at least a week to give all their staff time off.
It’s rarer to find outside of Formula One team factories these days but there’s definitely a “summer slowdown” effect in the latest corporate insolvency figures released by The Insolvency Service.
July’s official figures saw a headline reduction in insolvencies to 1,727 which is down on last month’s total of 2,163 – a 20% reduction and a 6% annual reduction on the same number last year but the breakdown of the different categories tells an interesting story.
England and Wales
The main driver in the reduction of insolvencies in July by 436 was through the lower number of creditor voluntary liquidations (CVLs).
The other types of insolvencies were fewer but held up stronger and all apart from CVLs saw an annual increase while CVAs, which we wrote were coming back strongly, saw an actual increase.
Of the 1,727 registered company insolvencies in July 2023, the majority remain CVLs with 1,336 which comprises 77% of all corporate insolvencies but is 17% lower than the total from 12 months previously.
The continuing strong showing shows that HMRC and other creditors are forcing more businesses to close in order to secure some return on their debts rather than allow the business to trade and repay arrears over an extended period.
124 administrations were recorded which is slightly less, down six, from last month but is 53% higher than the total from a year ago.
There were 19 company voluntary arrangements (CVAs) which was an increase from the 14 last month and a big annual increase, almost four times as many as recorded in July 2022.
Many more directors are using CVAs and administration to help restructure and protect their businesses while they make changes and pause debts showing that there remains a great appetite to keep businesses alive and trading rather than close down and write off debts, although that is always an option if these measures are unsuccessful.
There were no receivership appointments in July and one additional insolvency moratorium was recorded by Companies House bringing the total since their inception in June 2020 to 46 with an additional 22 companies having their business restructuring plans approved by a court.
In Scotland there were a total of 97 company insolvencies in July which was a reduction from the 113 recorded last month but was still 41% higher than the corresponding total from a year ago.
The total is made up of 51 CVLS (down from 72 last month); 44 compulsory liquidations (up from 36) and two administrations (down from five). There were no CVAs or receivership appointments recorded in Scotland last month.
Compulsory liquidations have traditionally been the most numerous kind of corporate insolvency in Scotland and increased last month but since April 2020, CVLs have overtaken them with nearly three times as many being recorded.
There were 13 company insolvencies registered in Northern Ireland in July which was a decrease of one from last month and a 7% reduction on the total number from a year previously.
Northern Irish insolvencies tend to be traditionally a lot lower than the numbers of England, Scotland and Wales. Because these numbers are smaller any changes will have big increases on percentages which could indicate bigger changes than have actually happened.
The total of 13 in July was comprised of eight CVLs (down from 11 last month); three compulsory liquidations (up from two) and two CVAs (up from one). No administrations or receivership appointments were recorded.
The total number of company insolvencies for the whole of the UK in July 2023 is 1,837 – a decrease of 453.
“Economic issues continue to bite businesses”
Nicky Fisher, President of R3, the insolvency and restructuring trade body said: “The fall in corporate insolvency levels is due to fewer businesses entering a creditors voluntary liquidation (CVL). However a large number of directors are still using this process to close down their businesses.
“Despite the monthly and yearly falls in corporate insolvencies, numbers are still well above pre-pandemic levels as the economic issues continue to bite businesses.
“Costs are rising at a time when people are cutting spending back, leaving businesses facing the challenge of squeezed margins and shrinking revenues and having to work out whether to absorb their cost increases or pass them onto their customers.
“Alongside these, requests for wage increases, and higher energy bills are also hitting businesses hard as the costs of cooling premises in the summer are just as challenging as keeping them warm in the winter.
“These are making firms more cautious about investment or recruitment – especially as the increased cost of borrowing will make raising funds for investment more challenging.”
July might have seen a slowdown in corporate insolvency numbers but don’t sleep on the annual increases that show overall numbers are still higher than they were 12 months ago.
Inflation might have dipped slightly but interest rates are still high and are expected to rise further going into the autumn.
There are still many obstacles for business owners and directors to navigate around this year which is why they should consider getting directions from people who know exactly what and where they are.
We offer a free, initial consultation to anybody who wants to know exactly what options they have and how they can implement them quickly to get the best results they can.
Get in touch with us today and we can start working on your survival strategy together.