Business Insolvencies drop 6% in May

change in numbers of business insolvencies

Latest figures from the Insolvency Service have shown that there were 2,006 business insolvencies in England & Wales in May 2024, a decrease of 6% when compared to April 2024 figures (2,144) and 21% lower than the same month in the previous year.

The business consisted of 271 compulsory liquidations, 1,590 creditors’ voluntary liquidations (CVLs), 126 administrations and 19 company voluntary arrangements (CVAs).

CVLs accounted for 79% of all business insolvencies. The number of CVLs decreased by 5% from April 2024 and was 26% lower than during the same month last year (May 2023, which saw a record high monthly number of CVLs in the time series going back to 2000), after seasonal adjustment. Numbers of CVLs and administrations were lower than in both May 2023 and April 2024, while the number of compulsory liquidations was lower than in May 2023, but higher than in April 2024.

The number of seasonally adjusted compulsory liquidations in May 2024 was 10% lower than in April 2024, but 27% higher than in May 2023.The number of administrations in May 2024 was 13% lower than in April 2024 and 20% lower than in May 2023, after seasonal adjustment.

The number of CVAs was 37% lower in May 2024 than May 2023, but 6% higher than in April 2024. Business Experts say Numbers remain low compared to historical levels. CVAs are not seasonally adjusted due to low volumes.

Reduction in Business Insolvencies

Commenting on the drop in Business Insolvencies, Tim Cooper, President of R3, the UK’s insolvency and restructuring trade body and a Partner at Addleshaw Goddard said “The month-on-month fall in corporate insolvencies is driven by lower numbers of Administrations, Compulsory Liquidations and Creditors’ Voluntary Liquidations (CVLs), while the reduction in numbers we’ve seen compared to May 2023 is mainly driven by a fall in Administrations and CVLs. However, levels of corporate insolvency are still higher this month than they were in May 2019, and this is because CVL levels are higher – significantly higher – now than they were then, as a greater number of directors are closing their businesses after four tough years of trading during and post-pandemic.

“The business climate remains challenging due to a variety of short and long-term issues. Inflation levels, cautious consumer spending, and the costs of energy and fuel have been affecting businesses for months, while shorter-term issues like the rain we experienced in April and May will have hit firms in the construction, retail and hospitality sectors.

“Retail and hospitality will have seen a lower footfall as a result of the wet weather over the last couple of months, and this will have been another blow after a tough start to the year, a poor Christmas trading period and the longer-term impact of people spending less. However, these industries will be hopeful the Euros will bring an increase in footfall and spending in England and Scotland, which may help make up for a slow start to the year.

“The rain will have also caused delays and disruption to construction projects, which will create additional issues for a sector that had seen a reduction in new work at the end of last year and the start of this one.

“Another factor affecting businesses is the wait for the Monetary Policy Committee’s decision on the Bank Rate of interest as the impact this announcement has on everything from leasehold agreements to foreign exchange rates may have resulted on firms choosing to enter or choosing to delay entering an insolvency or restructuring process depending on the timings of their current arrangements. The Committee’s decision is also likely to affect businesses in the future, given the impact it has on a range of areas of commercial and international finance.

“When it comes to trends in insolvency and restructuring over the next couple of months, I would expect the liquidation numbers to soften slightly, and mid-market businesses to look towards exploring their options for restructuring plans as the recent ruling on Tasty plc’s proposals will potentially open up the market for this process to firms of this size, but with low market expectation of an interest rate cut before the August Monetary Policy Committee sitting at the earliest, it could be a slow summer for restructurings.

“Despite the challenges businesses face and the uncertain political and economic climate, they are generally more optimistic about the coming months, and many expect output and sales levels to rise and are planning to recruit extra staff. With the economy growing in the first quarter of this year and predicted to grow again in the next quarter, the tide may be about to turn for the better.”


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