A levelling out of the monthly number of corporate insolvencies in England and Wales is adding weight to signs that the broader economy is showing tentative indications of recovery.
This is according to the Midlands branch of the UK’s restructuring, turnaround and insolvency trade body R3 and comes on the back of figures published yesterday (19 August) by the Insolvency Service which show that corporate insolvencies increased only marginally by 1.4% in July to a total of 2,081 compared to June’s total of 2,053, and rose by only 0.1% against July 2024’s figure of 2,078.
R3 Midlands chair Stephen Rome, a partner at law firm Penningtons Manches Cooper in the region, said: “Corporate insolvencies remained broadly stable last month, with the trends showing a rise in Compulsory Liquidations and a slight uptick in Administrations, while Creditors’ Voluntary Liquidations and Company Voluntary Arrangements fell.
“This pattern may suggest that fewer directors are choosing to close their companies voluntarily, whether because they are seeing improvements in trading conditions or they are caught in a holding pattern, waiting to see where the economy may next head.
“The broader economic picture is showing tentative signs of recovery, following a weak April and May, when some spending may have been brought forward in anticipation of higher prices. Economic activity picked up in June, helping Q2 GDP to grow by 0.3%.
“While this represents only modest growth, it is encouraging to see the economy moving forward rather than stalling. Coupled with the recent cut to interest rates, the outlook for businesses appears slightly more positive, though it is too soon to gauge the full effect, and above target inflation remains a concern.
“R3’s message to local businesses is to remain cautious. Challenges exist for both retail and hospitality, where higher costs, changing consumer habits, and uneven demand continue to make trading conditions difficult.
“Within retail, the difficulties appear concentrated among individual retailers rather than the sector as a whole, with some larger high-street brands being outpriced and outperformed by cheaper online, alternatives as shoppers seek the best value.
“Construction remains one of the sectors most affected by insolvencies. While it is encouraging to see output rising, many businesses are still facing challenges. Supply chain pressures, skills shortages, and changes in the housing market mean the environment for construction firms continues to be complex and unpredictable, even as overall activity shows some improvement.
“Ultimately, any business owners worried about their company’s finances should seek professional advice as soon as possible. Most R3 members will give prospective clients a free initial consultation to learn more about their situation and outline the potential options open to them to improve it.”
