Company failures fall 31% in April

The number of company insolvencies decreased by 31.8% in April 2023 to a total of 1,685 compared to March’s total of 2,471

The total figure was down 15% compared to last year’s number of 1,988, driven by a decrease in the number of creditors’ voluntary liquidations (CVLs).

However, this was higher than levels seen while the government support measures were in place in response to Covid-19 and also higher than pre-pandemic numbers.

The fall in insolvencies was seen across some sectors, with manufacturing seeing the greatest change. However, retail, hospitality, leisure and construction are still under pressure.

There were 1,368 CVLs, which was 23% lower than in April 2022, which stood at 1,771. The number of administrations and compulsory liquidations was higher than in April 2022.

In addition, 183 compulsory liquidations occurred, which was almost twice the number in April 2022.

The total number of compulsory liquidations has increased from historic lows seen during the pandemic, partly as a result of an increase in HMRC winding-up petitions.

Colin Haig, head of restructuring at Azets, said: ‘The long term trend in business failures will continue to tick upwards despite the total number of insolvencies dipping last month. More concerning is the number of compulsory liquidations, which continues at double the rate of last year and is also likely to keep rising.

‘Liquidation is an end-of-life process. It’s still possible to achieve going concern solutions for quite distressed business – but that won’t last.’

There were 6,336 individual involuntary arrangements (IVAs) registered per month in the three-month period ending April 2023, which is 16% lower than in the same period last year, which stood at 7,308.

For individuals, 531 bankruptcies were registered, which was 5% lower than in April 2022, which stood at 559.

Mark Supperstone, managing partner at ReSolve, said: ‘These statistics show that businesses are still operating in challenging times. While the number of insolvencies fell, the slight increase in liquidations and administrations highlights the fact that companies are still facing many ongoing issues.

‘Recent banking crises have made it more difficult for companies to secure investment, leading to challenges for businesses across a range of sectors.

‘The easy access to finance witnessed over the last decade has certainly ended, meaning businesses will have to focus more on cash flow and profitability to remain solvent. That said, the fall in insolvencies does hopefully suggest that conditions are beginning to improve.’

Commenting on the figures, Michael Mulligan, insolvency partner at Kingsley Napley LLP, said: ‘Whilst the Covid pandemic is largely over, many companies are still suffering from the long term economic effects of the same, and many have been unable to turn around their businesses to make up for the long periods of significantly reduced turnover during that period.

‘The financial issues these companies face have been exacerbated by rising inflation, in particular energy prices, and reduced consumer spending. All of this has had an adverse impact on turnover, profitability, and increased creditor enforcement action has shortened the timescale that companies have in practice to turn their businesses around.’

For answers to your questions on what happens to employees during an insolvency, visit BrAInbox today where you can find answers to questions like Does TUPE apply to insolvency proceedings?

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