We will provide practical advice and help avoid the pitfalls of creating a personal liability for not acting in a company’s best interests. We offer services ranging from advisory and informal solutions through to the formal insolvency procedures. If you, or one of your clients are facing challenges, please contact Vince Green or Steven Edwards who lead the team, or your usual Crowe contact.

Tailored solutions for clients under financial distress

As proponents of the business rescue culture, we want to see your business thrive and prosper, helping you overcome financial challenges.

We analyse the difficulties you have encountered and explain the options that are available and suitable for your needs.

With the aim of a positive outcome, we offer a free consultation to review a company’s affairs and we will provide advice to a board on what we consider to be the best option(s) for a company and its stakeholders. 

We will provide practical advice and help avoid the pitfalls of creating a personal liability for not acting in a company’s best interests.

Vince Green, Head of Recovery Solutions said:

February 2024: Understanding corporate insolvency

Source: Insolvency Service

The corporate insolvency statistics for February 2024 are in, and they’re noteworthy. Company insolvencies have risen by 17% compared to the same month last year, with a total of 2,102 registered insolvencies. This is also 73% higher than February 2019.

The causes of distress have been well documented over the last few months, including the consumer spending squeeze, input cost inflation, wage inflation and higher interest rates. These operating pressures may continue to mount higher with the scheduled end of the Energy Bills Discount Scheme in April 2024.

Looking ahead, the next six months could remain challenging for corporates. The end of monetary tightening and declining inflation are expected to stabilise the financial market; however, we are likely to be in a high cost of capital environment compared to the last decade.

With many loans taken out or refinanced during the COVID-19 pandemic, there is a potential wall of debt maturities over the next 12 to 24 months which could lead to many businesses having much higher debt service costs.

If your business or your clients have debt maturing in the near term, they should ensure that they have robust financial forecasting in place factoring in the potential higher debt costs that will have to be met. Now more than ever, it’s crucial for businesses to be alert to signs of financial distress and seek advice early.

For more information, please contact our restructuring and insolvency team of Steven Edwards, Vince Green and Mark Holborow.

January 2024: UK officially enters recession

insolvency Jan 24

Source: Insolvency Service

In January 2024, there were 1,769 new insolvency appointments, marking a 5% increase from the previous year and 2.5% higher than 2019. Although the number of appointments was lower than the 2023 average, which is typical for the beginning of the year, the rolling three-month average remains the highest since 2009's financial crisis.

Despite the Bank of England (BoE) maintaining the Base Rate at 5.25% in February and January's 4% inflation rate, the UK officially entered a recession with a 0.3% GDP reduction in Q4 2023. However, there's hope on the horizon as the BoE hinted at potential rate decreases starting as early as June, and inflation stabilised at 4%, defying forecasts of a rise due to increasing energy prices.

Unfortunately, these positive signs may come too late for the thousands of businesses that faced insolvency last year, and the challenges are expected to persist.

If your business is experiencing cash flow issues or foreseeing limited headroom, seeking support promptly is crucial. The sooner you explore your options, the more viable alternatives you'll have and the better chance for a successful outcome.

For more information, please contact either Steven Edwards or Vince Green who are licensed insolvency practitioners, or your usual Crowe contact.

December 2023: Insolvency trends and record-breaking year in business challenges
December '23 insolvency stats 

Source: Insolvency Service

In December 2023, there were 2,002 new insolvency appointments — a 2% increase from the previous year and a substantial 59% rise from December 2019.

While a 2% year-on-year increase might suggest stability on the surface, closer examination reveals that December 2022 was a peak month for that year, whereas December 2023 was relatively average for the preceding 12 months (with an average of 2,094 new appointments per month in 2023).

Despite recent economic commentary indicating the UK may have avoided a formal recession in 2023, with growth forecasts hovering around 0.5% of GDP, the challenges faced by businesses have been escalating. High interest rates, wage pressures, and cost inflation throughout the year are evident in the insolvency statistics.

However, with 25,130 new insolvency appointments, 2023 marks the highest number in 30 years. Even during the peak of the credit crunch in 2009, which was the last sustained period of high insolvency appointments, there were only 24,034 appointments – 1,096 less than in the year just gone. When the quarterly statistics are released at the end of January 2024, we will provide further insight on the trends seen in 2023, comparisons to recent recessions and our views on what 2024 may bring for companies. 

November 2023: Statistics reveal 2,466 new corporate insolvency appointments

Nov 23 Insolvency stats

Source: Insolvency Service

As predicted in our October 2023 commentary, the persistently harsh winter is reflected in November with 2,466 new corporate insolvency appointments — an increase of 21% from the same period in 2022 and a staggering 64% higher than November 2019, pre-Covid.

Year-to-date, we’ve witnessed 23,124 insolvency appointments, signalling the extreme pressures companies are facing. Remarkably, within just 11 months, there’s been 5% surge compared to the entire previous year and a substantial 35% rise compared to the 12 months of 2019.

Whilst the Bank of England’s recent decision to maintain the base rate at 5.25%, providing stability in financing pressures, it is also not easing from its 15-year high. The cost of borrowing is a substantial cash cost for many businesses and one which is difficult to mitigate or reduce.

Whilst it is the season of good cheer, there is little for many company directors to be cheerful about at present.

October 2023: Mid-market businesses continue to drive the rising trend in insolvency statistics

Insolvency stats Octt23

Source: Insolvency Service

Last month, I cautiously hoped for improvement as the rolling three-month average decreased. However, October has reversed this trend with 2,315 new insolvency appointments. These mark a 19% rise from the previous year and is 57% higher than the comparable figures from 2019.

The common themes continue with over 90% of new appointments being Creditors Voluntary Liquidations (CVLs), a process mostly used for companies that have no prospect of recovery or rescue.

The impact is primarily on small enterprises and owner-managed businesses, as the majority of appointments relate to companies with a turnover of less than £1 million. These businesses generally operate with smaller reserves, making them more vulnerable and less capable of navigating through economic pressures or undergoing restructuring.

To date, large corporates have continued demonstrating resilience. While anecdotal reports suggest internal reviews, project deferrals and cost-saving measures being implemented. However, the larger segment of the market has not yet needed to resort to formal insolvency processes.

As the pressure continues for those in the small and medium-sized enterprises (SME) sector, many directors may be facing a long and cold winter this year.

September 2023: Ongoing economic challenges are still causing business failures, highlighting the difficulties of recent years

Insolvency stats Sept23

Source: Insolvency Service

The 1,967 new insolvency appointments in September 2023 were 14% higher than the same month in the prior year and 30% higher than 2019. However, the 3-month rolling average has begun a slight decline from its highest point in May. Whilst it is too early to relax, it may be an indication that the extreme stresses are starting to stabilise, if not actually ease. 

Persistent economic pressures, stemming from inflation and high interest rates, have led to price increases and the narrowing of profit margins. In turn this is resulting in more aggressive creditor action, as companies seek to protect their own financial position and interests, by calling in debts and taking recovery action where previously they may have given more breathing room and grace to trading partners.

As you would expect, the recently produced quarterly statistics echo the same trend. Whilst the number of appointments in Q3 was marginally lower than Q2, it was 10% higher than the prior year and 41% higher than the 2019 pre-pandemic rate.

Industry data

Insolvency stats bar Sept23

Source: BEIS and the Insolvency Service

The graph above compares the number of businesses in a sector, to the rate of appointments over the first three quarters of 2023. It highlights that hospitality and wholesale / retail sectors are shouldering the burden of the current downturn; with the proportion of appointments substantially higher than the number of businesses would suggest. This is probably because of the nature of the challenges – principally squeezing consumer wallets and reducing disposable income.

The manufacturing sector has experienced a notably higher number of appointments in the last quarter. The sector has weathered substantial challenges over the last few years, with supply chain disruption and cost inflation among other factors that have depleted many companies’ financial reserves, as well as their directors fighting spirit.

August 2023: Wilko collapses into administration

August 2023 Insolvency data

Source: Insolvency Service

Conventional wisdom suggests that the insolvency market is quieter over the summer months, due to annual leave. Meaning, less decision makers are around from companies, creditors, HMRC and even the judiciary themselves to progress actions. However, conventional wisdom has itself been on vacation for most of this year and August it seems was no exception.

The 2,308 new insolvency appointments in August 2023 is 20% higher than the same month last year and an incredible 69% higher than the pre-pandemic August 2019 figure. Whilst press headlines have been focussed on Wilko as the latest high-profile collapse on our high street, the impact on the insolvency statistics is limited. There were only four appointments across the group – not enough to materially skew the figures and in fixating on the one high profile failure, the underlying groundswell of distress remains largely out of the public eye.

From our own activities over the summer there has been a clear increase in number and size of companies seeking support because of financial distress. With recent reports of the shrinking UK economy, expectations that there may be another interest rate rise just around the corner and inflation remaining high, (albeit slowly falling) there appears to be no reason to expect the economic environment to ease substantially in the near term.

July 2023: Volatility continues

July 2023 insolvency data

Source: Insolvency Service

This year has seen unusual volatility in the number of appointments as once again we go from record breaking high numbers of new appointments in May and June (2,552 and 2,163 respectively) back down to 1,727 in July. Whilst the extreme sawtooth profile over the first seven months of 2023 is unusual, the fact that even the ‘low’ months of this year still exceed the number of appointments seen at any point from 2019 through to early 2022 is a clear indicator of the level of pressure businesses are feeling.

There does not seem to be a clear trigger for the volatility between months. Whilst some inflationary pressure may have started easing through July 2023, the impact would not be expected to be so swift or dramatic as the fall in July appointment figures would imply. Nor were there substantial bank holidays, religious festivals or other major national events that can sometimes skew statistics.

Considered on a rolling three-month average basis to smooth out the extremes, the rate of company failures in 2023 continues markedly above historical levels and has accelerated sharply through early 2023 following a period of relative stability in 2022, albeit stabilising at a higher level than historical averages. It will be interesting to see whether August brings us a summer respite from the turmoil or another twist in this rollercoaster of a year.

June 2023: Q2 2023 recorded the highest number of CVL appointments in a single quarter since records began

It comes as no surprise that due to continued pressures; businesses are continuing to suffer, and the number of insolvencies continues to rise at record rates.

2,163 new insolvencies have been recorded, which is 27% higher than last year and the third highest recording since monthly reporting began in January 2019. The top three months have all been recorded in 2023, with 2,457 in March and 2,552 in May.

On a seasonally adjusted basis, the Q2 statistics were 13% higher than last year and concerningly 60% higher than the average for the last decade. The first half of 2023 saw 12,166 insolvency appointments recorded and at its current rate, it is expected to surpass the average 16,000 yearly appointments by September. The record rates continue to rise, with 18,819 new creditor voluntary liquidation appointments recorded; the highest since records began in 1960.

We can see that it has primarily been smaller mid-market firms and family-owned businesses falling into insolvency however, no sectors are immune. While smaller businesses do not attract as much media attention, it’s worth keeping in mind that the middle-market accounts for 60% of employment and 50% of turnover in the UK. So, whilst mainstream media looks elsewhere for headlines, the economic and fiscal impact of these continued high rates is substantial and cannot be ignored.

Industry data

Source: Insolvency Service

The graph summarises new insolvency appointments by industry for Q2 2022 vs Q2 2023. Whilst almost all sectors have seen a rise in insolvency appointments compared to the same time last year, there have been substantial increases across hospitality (including accommodation) and wholesale / retail. Given the nature of the current economic challenges with high inflation putting pressure on consumer spending, it is not surprising that these industries, which are highly dependent on discretionary spending, are suffering the most.

The further increase in the Bank of England base rate announced at the beginning of August will only dampen demand further, and we expect to see high rates of insolvency appointments continue through this year and at least the first half of 2024.

May 2023: New appointments reach a new high

After a brief respite in April, the spiralling insolvency rates have returned in May, with 2,552 new appointments – 95 more than the previous record in March 2023.

The Bank of England (BoE) base rate is now set at an eye watering 4.5%, the highest in 15 years. With rates having been stable at below 1% since early 2009, many businesses have never had to deal with debt costs at this level. Forecasts predict the base rate might peak at 5.5% by November and remain high through the early part of 2024. For businesses who have existing debt, the ongoing affordability of payments will be a challenge – and for those with new funding requirements, the appetite of banks to lend and the debt leverage which banks will consider will be substantially lower than in recent years.>

We have seen in the past that when cash flows and the availability of finance becoming challenging it can often be a double-edged sword. There is the obvious immediate short-term challenge of managing cash flow, but also a longer-term knock-on effect. As funding becomes more expensive management teams tend to hold back on investments, whether that is research and development (R&D) to innovate new products or replacing and upgrading older machinery. Whilst this benefits the cash flow in the short term, over time businesses start to stagnate, efficiency reduces, repair and maintenance costs increase, and margins decline. The company can end up financially challenged or surpassed by competitors who have deeper pockets or shareholder support to continue investing.

Whilst the immediate challenges are clear and demonstrated by the high level of insolvency appointments recently, the path out of the current doldrums may be a long and weary grind for many businesses and we don’t expect the phones in our restructuring team to stop ringing anytime soon.

April 2023: New appointments stabilise but it may be too soon for optimism

"Whilst the number of corporate appointments dropped sharply in April (1,685) from the record high recorded in March (2,457), they remain substantially higher than numbers recorded in 2021 and pre-COVID-19.

Although, the news is encouraging, the challenging conditions continue for many businesses and recent figures suggest that 1,700 insolvency appointments a month is the starting point, even when there are no specific new shocks to the economy.

While energy prices are falling, the Bank of England expect inflation to drop “rapidly” by the end of the year – whilst helpful, this is unlikely to resolve the existing pressure as lower inflation is simply a slower rate of increase from the existing high prices, rather than costs actually reducing.

Even as inflation rates fall, the cost of living crisis means there is little opportunity for businesses to increase prices in the current environment and the rising base rate results in further stress for companies with bank debt.

Therefore, it is too early for optimism as the effects of the cost of living crisis are likely to impact businesses for a long time."

March 2023: The highest rates we’ve seen this year

Vince Green, Head of Recovery Solutions said:

"March’s insolvency data shows continued high failure rates in corporates with 2,457 insolvency appointments in March 2023 - the highest rates we’ve seen this year and the highest recorded for four years.

The coming of spring clearly hasn’t been an indicator of hope or new starts for many businesses because the trend for high insolvency activity established in 2022, as a result of, high interest rates and inflation has continued in Q1.

The rate of appointments is showing a clear step-change compared to pre-COVID-19. On a rolling three-month basis new appointments were consistently around 3,700 in 2019, but have not fallen below 5,000 over the last 12-month period. Many businesses exhausted their reserves to pull themselves through COVID-19 and are now trying to balance the books while having to repay pandemic related borrowing and struggling with profit margins squeezed by cost inflation. I expect to see continued high failure rates and consolidation across most sectors in the medium term, as challenged businesses continue to be put under pressure by competitors who have stronger balance sheets and can use competitive pricing to create a dominate market position.

The previously reported trend towards liquidation appointments rather than administration or company voluntary arrangement (CVA) also continues, with a consistent 94% of recent appointments being liquidations."

February 2023: The rate of new insolvency appointments shows no sign of slowing.

1,783 new insolvency appointments in February 2023 is a slight increase from January, but a 17% increase on the prior year.

An increase in insolvency appointments was expected post-pandemic as some companies that may otherwise have failed during 2020 and 2021 were artificially propped up by easy access to funding. Whilst an increase in new appointments was expected the step change from around 1,500 appointments per month in late 2021 / early 2022 to c.1,900 from March 2022 onwards was not foreseen.

The rapid and significant increase in appointments is a reflection of the substantial cost pressures being faced by all businesses. Triggered by the Russian invasion of Ukraine in late Feb-22 energy price and input costs of most goods have rapidly increased and squeezed profit margins, threatening businesses abilities to repay debts which were incurred during the turmoil faced over the last few years.

January 2023: The concerning percentage of liquidations

In January, there were 1,671 appointments recorded, which is a slight decrease to the previous six months, where on average, there were 1,901 appointments. However, the optimism stops there because the number of recorded appointments is still substantially higher than the average for the past three years (average was 1,219 appointments per month).

More alarmingly for businesses, is the balance of appointments continues to be heavily weighted towards liquidations (94% of appointments) compared with previous periods. This suggests that most companies in distress are having to cease trading and sell assets on a breakup basis, rather than seek a rescue or sale of the trading business.

Sector insights

In addition to releasing the January statistics, the Insolvency Service has also updated the industry level information for 2022.

Perhaps unsurprisingly, given the energy and cost of living crisis, hospitality businesses had the highest rate of appointments in Q4 2022, with 4.4 insolvencies per 1,000 registered companies. This was 13% of insolvency appointments emerging from only 6.5% of UK registered companies. The hospitality sector was closely followed by manufacturing (3.2 insolvencies per 1,000 companies) and construction (2.9 insolvencies per 1,000 companies). Unexpectedly, given the negative headlines in the press pre-Christmas, the retail sector recorded only 2.2 insolvencies per 1,000 companies – 15% of both the Q4 appointments and registered businesses.

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