Recent quarterly Insolvency Service data showed that corporate insolvencies in England and Wales hit the highest level since 2009, with 6,342 registered insolvencies in the 3 months to June 30th, a 13% rise, year on year, and 9% up on the previous 3 months. The most recent monthly figures, for August 2023, showed a similar picture, with the increase in corporate insolvencies being 19% compared to August 2022, with most being Creditors Voluntary Liquidations (81.5%). The Insolvency Service commented that:
“….this was higher than levels seen while the Government support measures were in place in response to the coronavirus (COVID-19) pandemic and also higher than pre-pandemic numbers.”
In this article, we look at some of the reasons for this rise in insolvencies and note that our Licensed Insolvency Practitioners continue to receive large numbers of enquiries from directors of financially troubled companies who are looking to close their companies down. As ever, the earlier advice is sought, the more can be done to help.
Economic conditions remain very tough.
Costs continue to rise. Although inflation is down by 40% from its peak, according to Chancellor Jeremy Hunt’s recent speech at the Conservative Party Conference, that doesn’t mean prices are falling. They are still going up, only less fast than they were, at a time when people are cutting spending back. This continues to mean that businesses are facing the challenge of squeezed margins and shrinking revenues and having to work out whether to absorb their cost increases or pass them onto their customers.
Wages increase requests continue and energy bills remain significantly higher than 2 years ago. This latter point hits businesses hard throughout the year, as the costs of cooling premises in the summer are often as financially challenging as keeping them warm in the fast-approaching winter. Together, rising wages and high energy bills are making firms more cautious about investment and/or recruitment – especially as the increased cost of borrowing, via higher interest rates, will continue to make raising funds for investment more challenging.
What can Directors do if in financial difficulty?
It is important for directors to be vigilant to the signs of financial distress and act quickly if any of them present themselves, with Cashflow problems being one of the most important.
If firms are having cashflow issues, that can quickly lead to problems paying rent, staff and suppliers and that means the company is likely to be in a financially distressed state already.
Directors worried about their business finances should seek advice as soon as possible, as there will be more options and more time to take a decision if advice is sought whilst worries are at an early stage.
How can Insolvency Practitioners help?
The sooner we are appointed, the more likely it is we can help avoid a liquidation (usually a Creditors Voluntary Liquidation), perhaps with a turnaround procedure, such as an Administration or a Company Voluntary Arrangement.
Free Initial Consultation
We offer a FREE initial consultation without obligation and all enquiries are confidential. ABc offers big firm expertise at sensible prices that is appointment taker lead. We fully support the proposition “Always use fully qualified and regulated Licensed Insolvency Practitioners.”
If your business, or a business that is a client of yours, is facing financial difficulties, with insolvency and possibly a Creditors Voluntary Liquidation, please contact our insolvency practitioners or call us at any of our offices:
Also, K&W Recovery, trading as Antony Batty and Company, Thames Valley:
