New report shows corporate insolvencies at 14-year high

Economic challenges and lingering effects of the COVID-19 pandemic have led to a 14-year high in annual corporate insolvency figures, as businesses increasingly resort to insolvency processes to address significant financial difficulties.

The Midlands branch of R3, an insolvency and restructuring body, reports this trend based on the latest statistics from the Insolvency Service.

In November 2023, corporate insolvencies in England and Wales rose by 6.4% to 2,466 compared to October, and increased by 21.4% compared to November 2022.

This represents a 47.1% surge from November 2021 and a 63.9% increase from the pre-pandemic figure in November 2019.

R3 Midlands chair Stephen Rome, a partner at the Midlands office of Penningtons Manches Cooper, said: “These latest numbers have been driven by an increase in Creditors’ Voluntary Liquidations and Compulsory Liquidations, as more directors opt to close their businesses while that choice is still theirs. At the same time, creditors are pursuing debts to balance their own books.

“Notably, the figures published this month take 2023’s corporate insolvency figures to the highest annual total since 2009. This 14-year high is due to insolvency numbers being supressed by Government covid support measures and a relay of economic issues impacting heavily on businesses.

“Since the spring of 2020, firms have had to contend with the pandemic, the end of Government financial support, rising inflation, the cost-of-living crisis and supply chain issues – all with no time to draw breath and recover. The past year has been especially tough. Costs have increased, people have been reluctant to spend money as they worry about paying for the basics, and high interest rates have made paying debts or securing funding incredibly difficult.

“Given the timing and climate, it’s vital that directors and managers are alert to signs their business could be financially distressed and seek advice as soon as possible. It’s a very hard conversation to have, but speaking up when worries are new can provide more options for recovery, as well as more time to consider how to move forward.”