A surprise decrease in the number of insolvent businesses in England and Wales should be viewed with caution and is far more likely to be a ‘false dawn’ than an indication of economic recovery.
This is according to the Midlands branch of insolvency and restructuring body R3 and follows latest statistics published by the Insolvency Service which show that corporate insolvencies decreased by 15.2% in September 2023 to a total of 1,967 compared to August’s total of 2,319, but when compared to September 2022’s figure of 1,688 they increased by 16.5%.
The government statistics also indicate that corporate insolvencies increased by 35.4% from September 2021’s total of 1,453 and by 112% from September 2020’s total of 928. There is also a rise of 30.4% compared to the pre-pandemic figure of 1,509 in September 2019.
R3 Midlands chair Stephen Rome, a director at law firm Thursfields in the region, said: “The September 2023 numbers are the highest we’ve seen for this month in four years as a combination of economic issues, director fatigue and the post-COVID insolvency lag see a rising amount of firms use corporate insolvency processes to resolve their financial issues.
“Compared to September 2022, more directors have turned to Creditors’ Voluntary Liquidations to wind down their businesses and more creditors have turned to Compulsory Liquidations to recover the debts they are owed. While the statistics for these processes are higher than they were pre-pandemic, administration numbers have yet to return to 2019 levels, although they are higher than this time last year.
“It’s clear that the challenging trading climate is taking its toll. Businesses are operating in a climate where people are cutting back on their spending on non-essential items, while at the same time the costs of operating a business remain high – and will only increase as the weather gets colder and the cost of borrowing and servicing existing debts get more expensive.
“Our message to company directors is simple: if you’re worried about your business, seek advice. It’s a hard conversation to have, let alone start, but you’ll have more options open to you and more time to take a decision if you begin it when your worries are fresh, rather than when they’ve spiralled.”
