But not the highest we’ve seen this year
The latest set of corporate insolvency figures, issued by The Insolvency Service, should be a big deal, and maybe they will be, but coming after last month’s record corporate insolvency figures of 2,552, they could seem a little anaemic in comparison.
June’s official figures saw a slight reduction to 2,163 which is still the third highest monthly total recorded since January 2019 with the top three monthly totals all being recorded in the previous four months.
The figures were down 15% on last month but the total saw an increase of 27% on June 2022’s total with annual increases across the board on all insolvency categories.
Of the 2,163 corporate insolvency cases recorded in June, the majority remain Creditor Voluntary Liquidations (CVLs) with 1,759.
This makes up 81% of the total number and is 21% higher than the total recorded in June 2022.
This is an increase of 79% from June 2021’s total; a 192% rise from 2020 and 47.5% higher than pre-pandemic June 2019.
This was also 77% higher than 12 months previously, is the third consecutive month where the number has grown and is further evidence 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.
130 administrations were recorded in June which was an increase of 44% on the total from a year ago.
There were 14 company voluntary arrangements (CVAs) which was also an increase of 75% from June 2022.
The fact that so many directors are using CVAs and administration underlines that while liquidations (both voluntary and compulsory) remain the majority of cases, a lot are trying to find ways to keep trading and repay their debts rather than close down.
There were no receivership appointments recorded last month and one additional insolvency moratorium was recorded by Companies House bringing the total since inception in June 2020 to 45 with an additional 21 companies having their business restructuring plans approved by a court.
This is the 25th month when the total number of insolvencies was both over 1,000 and higher than the previous monthly total from 12 months ago.
In Scotland there were a total of 113 company insolvencies in June which was both 14% more than the previous monthly total from May and 51% higher than corresponding total from a year ago.
The total comprised 72 CVLs (up from 57 last month); 36 compulsory liquidations (up one) and five administrations (the same as a month ago). There were no CVAs or receivership appointments recorded in Scotland last month.
Compulsory liquidations have historically been the most numerous form of business insolvency in Scotland but since April 2020, CVLs have replaced them with nearly three times as many being recorded.
There were 14 company insolvencies registered in Northern Ireland in June which was an increase of three from last month but a 44% reduction on the total from June 2022.
The number of cases in Northern Ireland tend to be significantly and traditionally lower than in England, Wales and Scotland. The percentages tend to vary more widely than in other areas because the number of cases is so small and one or two could be the equivalent of a 10% jump or fall or more.
June’s total of 14 was comprised of 11 CVLs (up from eight last month); two compulsory liquidations (same as May) and one CVA (same as May again). There were no administrations or receivership appointments recorded.
The total number of company insolvencies for the whole of the UK in June 2023 is 2,290 – an overall decrease of 370 from May, although this was a historic high total.
It could be the final blow for those businesses that are just managing to surviveNicky Fisher, R3 President
Nicky Fisher, President of R3, the insolvency and restructuring trade body said: “The monthly fall in corporate insolvencies is driven by a reduction in creditors voluntary liquidations (CVLs) but number for this process are still higher than they were pre-pandemic as a sizeable number of directors are still choosing to close their businesses while the choice is still theirs to make.
“Despite the monthly fall in corporate insolvencies, levels are higher than they were this time last year – and well above what they were this time two, three and four years ago, as the hangover from the pandemic combines with a challenging trading climate caused by a number of economic issues.
“Firms are trading in a time of cautious consumer spending and rising costs, which are hitting margins and profits hard. Directors expect costs and wages to rise further as the year goes on, and if these don’t translate into more demands for goods and services, it could be the final blow for those businesses that are just managing to survive.
“Rising interest rates are another potential challenge, as that will make the cost of borrowing more expensive and may price some firms out of the survival funding they’ll need.
“Given the economic and business climate, we urge directors to be alert to the signs of financial distress, and seek advice if they find themselves facing issues like rising stock levels, problems with cashflow or difficulties paying staff, taxes or suppliers.”
June has seen a continuation of the very high monthly insolvency figures from the previous few months.
This should be a cause for concern under benign economic circumstances but given stubbornly high inflation and increasing interest rates, it’s a time of concern for most business owners and directors.
This is why we offer a free, initial consultation for them to better understand what options they have to adopt to move their business forward.
Alternatively, if they feel they have no choice but to close the company for whatever reason, we can work with them to ensure the process is as efficient and straightforward as possible so they can move onto their next professional venture quickly.
No matter what their next move could be, the first step should always be to get in touch with us to arrange a virtual meeting at a time most convenient to them.