A month-on-month fall in the number of corporate insolvencies in England and Wales does not reflect current tough trading conditions, with the number of businesses becoming insolvent in the region likely to rise significantly throughout 2024.
This is according to the Midlands branch of the UK’s insolvency and restructuring trade body R3 and comes on the back of figures published by the Insolvency Service which show that corporate insolvencies decreased by 18.9% in December 2023 to a total of 2,002 against November’s total of 2,470.
Despite this, last month’s figure is an increase of 1.9% compared to the 1,965 corporate insolvencies in December 2022, and a rise of 34.4% in comparison with December 2021’s total of 1,490. Looking at pre-pandemic figures, the December 2023 statistic is 78.9% higher than the same month in 2019 (1,119).
R3 Midlands chair Stephen Rome, a partner at Midlands law firm Penningtons Manches Cooper, said: “The monthly fall in corporate insolvencies is due to a drop in Compulsory Liquidation, Creditors’ Voluntary Liquidation (CVL) and Administration numbers.
“The year-on-year rise in corporate insolvencies is driven by an increase in CVLs and a slight increase in Company Voluntary Arrangements, as the volume of businesses entering the other corporate insolvency processes fell compared to last December.
“These new figures are the highest for December in four years and reflect the final month of a difficult year. December was tough for many local businesses as they faced additional expenses at a time when margins were already tight. These won’t have been helped by a slowdown in consumer spending and a rise in energy prices.
“These extra costs could have been the final blow for many businesses and may have led to their directors turning to an insolvency process to resolve their firm’s financial issues.
“If the New Year trading period hasn’t improved on the one before Christmas, we could see insolvency numbers continue to rise, as businesses who had banked on a festive income boost to cover any financial shortfall turn to the profession for help.
“In such instances, directors should seek professional advice as soon as possible. This will give more potential solutions than acting only when problems become more severe.”
