Grim outlook as liquidations reach record levels

One of Britain’s leading restructuring and recovery experts has forecast a ‘grim outlook’ for British businesses as liquidations reached new record levels.

Colin Haig, partner and national head of restructuring at accountancy firm Azets, reacted to the latest government statistics on new company insolvencies in England and Wales for the second quarter.

There were 6,342 company insolvencies in the three months from April to June, the highest since the second quarter of 2009.

There were 5,240 creditors’ voluntary liquidations (CVLs), the highest quarterly level since the start of the series in 1960, and 637 compulsory liquidations.

Colin Haig said: “The latest quarterly insolvency statistics provide a grim outlook for British businesses, with the lingering aftermath of the pandemic compounded by mounting debt burdens, supply chain disruptions, labour shortages, and rising input costs. Smaller businesses, in particular, have been hardest hit, struggling to cope with reduced consumer spending and restricted access to finance.

“Too few business owners are reacting quickly enough to distress signs. Early intervention and proactive restructuring can help prevent insolvencies and pave the way for sustainable recovery, avoiding liquidation.

“A restructuring plan can lead to the rescue of the business as a going concern. This means that jobs can be saved, suppliers can continue to be paid, and the business can maintain its relationships with customers and clients. It also allows the company to reorganise its operations, improve efficiency, and implement changes needed for long-term sustainability.

“It’s likely administrations will keep rising over the next 12 months – but an administration is not always bad news. Any transaction that keeps a business trading and preserves IP, capital, and employees, is a solution. Switched on management teams have greater access to these solutions. For businesses navigating through these turbulent times, strategic planning and prudent financial management is essential.”

Nigel Fox, thee Bristol-based director in the restructuring and recovery services team at Evelyn Partners, the wealth management and professional services group, said: “The number of company insolvencies was particularly influenced by creditors’ voluntary liquidations (CVLs), with 5,240 recorded in the second quarter.  The Insolvency Service commented that the number of CVLs was the highest quarterly level since the start of the series in 1960.

“The quarterly statistics are a very useful guide as to the current state of the market, but it should be noted that the number of CVLs were lower in April 2023 when compared to April 2022, but were then much higher in the following two months when compared to the previous year.  This is perhaps a reflection of the continued rises in interest rates and persistent high inflation during the quarter, reducing the hope that these factors might be only very short-term problems.”