Everything you need to know

England and Wales saw seasonally adjusted corporate insolvencies increase to their highest annual level since 2013 with 17,196 companies closing down. 

This is an increase of 6.8% from 2018, which was largely driven by an increase in Creditors’ Voluntary Liquidations (CVLs), which have reached their highest annual level since 2009. 

Seasonally adjusted corporate insolvencies fell by 1.8% on the quarter from Q3 2019 but rose 8.1% on a yearly basis compared to Q4 2018. 

Administrations also increased in 2019 compared to 2018 while Company Voluntary Arrangements (CVAs) were flat and compulsory liquidations fell. 

Underlying company insolvencies decreased in Q4 2019 compared with the previous quarter. This was mainly driven by decreases across all main types of company insolvency. 

Total insolvencies were higher in Q4 2019 compared with the same quarter in 2018 although compulsory liquidations have fallen for the fourth successive quarter. 

Incorporations and dissolution

Companies House also released their yearly data on the number of company incorporations and dissolutions in 2019 too. 

Between October and December 2019 there were 155,090 incorporations and 121,625 dissolutions in the UK – a net gain of 36,423 companies on the previous quarter in 2019 or 0.9%. 

The number of incorporations in Q4 2019 was slightly lower than Q4 2018 which is the first time there’s been a year-on-year decrease since 2012. This is balanced against the upward trend of new incorporations with 27,748 (21.6%) more incorporations in Q4 2019 than Q4 2018. 

During Q4 2019 the number of dissolutions also increased from the same period in 2019 rising 9,504 (8.5%) which is the highest number of dissolutions in a fourth quarter since 2012.  

The total number of dissolutions has also increased over time and has nearly doubled since Q1 2012 to Q42019 with 50,357 more recorded.

What does all of this mean?

Duncan Swift, President of insolvency and restructuring trade body R3, said: “Today’s figures are a reflection of anaemic economic growth in 2019. A number of factors have fed into this but weaker consumer confidence and sector-specific issues can’t be discounted either. 

“Every quarter in 2019 saw more corporate insolvencies than the corresponding quarter in the previous four years. The number of administrations, a procedure designed to support business restructure and rescue, have increased 24% compared to 2018 and are at their highest level since 2013. 

“Liquidations have been rising too. For some businesses at the moment, rescue isn’t possible, although insolvency practitioners will be doing their best. It’s not an easy climate for doing business out there.

“Looking ahead, one additional factor which may affect insolvency numbers in Q1 and Q2 2020 is the Government’s plan to make HMRC a preferential creditor in insolvencies from April.  This will benefit HMRC at the expense of lenders, customers and suppliers and will hurt business lending. Some businesses could be pushed into insolvency due to a reduction in their lending facilities. 

“These insolvency figures should be a wake-up call to any director of a company which is finding it hard going at the moment. Anyone in this position should look to take objective advice from a qualified, professional source, to decide the best path forward, and the earlier this is done, the better.”

Chris Horner, Insolvency Director with BusinessRescueExpert, agrees. He said: “Our experience confirms the findings that there have been more administrations and liquidations in Q4 last year than there has been for a while. 

“We don’t see signs of this abating if January 2020 is anything to go by either. It’s been one of our busiest months ever for inquiries and engagements from companies looking to rescue themselves from adverse business circumstances.”

With Brexit finally happening (in a sense), more business owners retiring or looking to make life and career changes and rumoured possible changes to Entrepreneurs Relief in the forthcoming budget, 2020 could be a pivotal year for many companies. 

Don’t look back on this year as the one that could have turned out differently if you’d made the right decisions.

Contact us today and one of our expert advisors will set up a free and convenient initial consultation with you.

You can tell us precisely where your business is at, where it’s heading and where you’d like it to be and we can get to work with you to plot an efficient and effective way to get from one to the other.