Business insolvencies rise 17% on last year
There has been a sharp annual rise in the number of company insolvencies in September 2023 to 1,967, 17% higher than the same month last year
Sara White, Editor, Accountancy Daily
The worst hit sectors were construction, manufacturing and retail industries, reflecting the impact of higher interest rates and a sharp drop in residential house building.
In total, 395 construction related businesses went bust, followed by 380 catering and hospitality businesses and 352 companies involved in the motor trade, including repairs and forecourts.
However, the total number of business collapses was down 15.2% on August’s total of 2,319.
The company insolvencies consisted of 255 compulsory liquidations, 1,576 creditors’ voluntary liquidations (CVLs), 125 administrations and 11 company voluntary arrangements (CVAs).
Nicky Fisher, president of R3, the UK’s insolvency and restructuring trade body, said: ‘September 2023’s corporate insolvency figures are the highest we’ve seen for this month in four years as a combination of economic issues, director fatigue and the post-Covid insolvency lag see more firms turn to corporate insolvency processes to resolve their financial issues.
‘The fact that all forms of corporate insolvency process have risen year-on-year, with the exception of CVAs which have held steady, shows that businesses are struggling on all sides and from all ends of the supply chain.
‘It’s clear that the challenging trading climate is taking its toll on businesses. Firms are operating in a climate where people are cutting back their spending on non-essential items, while at the same time the costs of operating a business remain high – and will only increase as the weather gets colder and the cost of borrow and servicing existing debts get more expensive.
‘Our message to company directors is simple: if you’re worried about your business, seek advice. It’s a hard conversation to have, let alone start, but you’ll have more options open to you and more time to take a decision if you have it when your worries are new, rather than when they’ve spiralled.’
The latest GDP figures showed that the economy grew by 0.2% in August with warnings the UK could enter recession later this year. The insolvency figures highlighted weakness in construction and retail sectors.
Mark Supperstone, managing partner at ReSolve, said: ‘UK businesses are finding the current economic conditions challenging and it is expected that this is likely to continue in the near future with the construction, manufacturing and retail industries particularly struggling.
‘In regard to the construction industry, there is some alarm at the PMI figures released this week which signalled the largest drop-in housebuilding activity since April 2009 – aside from the pandemic shutdown.
‘However, there are green shoots emerging with the number of insolvencies being 15% lower in September compared to August as well as interest rates potentially looking like they might be set to stabilise. As we have seen over the years, construction is highly susceptible to market changes and is often ‘first in, first out’ of a downturn.’
Any buinsesses facing financial challenges should seek advice as soon as possible, warns Chris Tate, restructuring partner at Azets.
‘The current economic environment is likely to have an ongoing impact on profitability, so businesses owners must continue to look at their pricing structures, reduce overheads wherever possible, forecast well in advance and be alert to changing conditions in their market,’ Tate advised.
‘The best way to ensure a rescue solution rather than insolvency is to seek advice at the first sign of distress. With robust financial planning, a timely restructuring plan can help businesses safeguard against liquidation, protect jobs, and ensure long-term survival.’