More companies became insolvent in the past year than did during the pandemic and the global financial crisis, according to the latest figures.
Company insolvencies hit 25,551 in the year to July 2024, according to the audit firm Forvis Mazars – 1.4% higher than the total number of companies that went insolvent in the same period during the financial crash (25,186 in 2008/09).
Insolvencies in the month of July consisted of 320 compulsory liquidations, the highest monthly number since before the Covid-19 pandemic. There were also 1,691 creditors’ voluntary liquidations (CVLs), 155 administrations and 25 company voluntary arrangements (CVAs).
The company liquidation rate in the year to July was 56.6 per 10,000 registered companies. This corresponds to one in 177 companies entering insolvency.
Rebecca Dacre, a partner at Forvis Mazars, said the figures are a strong reminder that many businesses are still a long way from recovery.
“Despite initial signs of improvement in the economy, some sectors are still experiencing severe difficulty as interest rates remain high. Falling consumer spending during the cost of living crisis has also made it incredibly difficult for some businesses to survive. The retail and hospitality sectors have borne much of the brunt,” she said.
“The slight drop in interest rates will be welcome news for many businesses during the busy summer months. However, unless we see a stronger economic recovery, it is likely we will see more companies pushed towards insolvency.”
And Tim Cooper, President of R3, the UK’s insolvency trade body, and a partner at Addleshaw Goddard LLP, said that despite a 75 decrease in insolvencies between June and July, the latest insolvencies were “the highest we’ve seen for this month since 2019.
“CVLs continue to be the most common corporate insolvency process, although their numbers have fallen compared to last month and July 2022. Used predominantly by smaller businesses, their increased take-up compared to July of last year and July 2019 reflects the challenging trading conditions these businesses have operated in over the past four years.”
He said increasing numbers of companies in administration compared with last year is a potential positive for business rescue prospects, highlighting the importance of early advice for exploring rescue plans, while the increase in compulsory liquidation figures shows the ongoing financial pressures creditors are facing.
“Recent improvements in market and economic conditions, driven mainly by a successful summer of sport and more stability for businesses following the General Election, have led to better trading conditions for retail, hospitality, and construction businesses. The construction sector is expected to receive a further boost through the government’s planned housing and infrastructure initiatives, although it will take time for them to have an impact.
“The improved economic and business climate should also result in greater acceptance and success of rescue proposals, and businesses of various sizes are showing a growing interest in Restructuring Plans, which is positive news for the profession.”
“The slight drop in interest rates will be welcome news for many businesses during the busy summer months. However, unless we see a stronger economic recovery, it is likely we will see more companies pushed towards insolvency.”
Rebecca Dacre, Partner, Forvis Mazars
