A month-on-month surge of over 50 per cent in the number of corporate insolvencies in England and Wales highlights the toll that three years of economic turmoil is taking on local businesses, with increasing numbers of companies expected to turn to an insolvency process over coming months to help resolve their financial issues.
This is according to the Midlands branch of the UK’s insolvency and restructuring trade body R3 and comes on the back of latest figures from the Insolvency Service which show that corporate insolvencies jumped by 51.2 per cent in May 2023 to a total of 2,552 compared to April’s total of 1,688, and by 39.8 per cent against May 2022’s figure of 1,825.
Furthermore, the May 2023 corporate insolvency levels shot up by 151.9 per cent in comparison with May 2021’s total of 1,013 and by 170.3 per cent against May 2020’s total of 944. Corporate insolvencies also increased by 89.3 per cent compared to the pre-pandemic figure of 1,348 in May 2019.
R3 Midlands chair Stephen Rome, director of law firm Thursfields in the region, said: “These corporate insolvency figures are the highest we’ve seen since January 2019, as the fallout from battling the effects of the pandemic – coupled with rising costs, increased creditor pressure, and high inflation – is causing more businesses to turn to an insolvency process.
“The key driver of the rise in numbers is the increase in Creditors’ Voluntary Liquidations, which are at a near four-and-a-half year high, and more than double the number they were in May 2019. Many directors are running out of time and options, liquidating their businesses before the choice is taken away from them.
“Firms are operating in a market where consumers are spending cautiously, costs are increasing and suppliers are chasing debts in an attempt to manage their own cashflow challenges. This is creating a tough climate for businesses of all sizes at a time when they need an injection of cash.
“While the summer months might provide some relief from energy costs, firms will have to pay to keep their premises, staff and customers cool, which will hit any potential savings.
“Going forward, interest rates and inflation will continue to create challenges for businesses seeking funding over the summer, which could be the tipping point for those companies on the brink of insolvency.
“Directors need to remain vigilant to signs of corporate distress and seek advice if they start to see stock levels increase, cashflow become an issue, or if there are issues paying rent, staff or bills. Seeking appropriate support as early as possible will give more potential solutions than acting only when problems become more severe.”
