
The latest government insolvency statistics reveal many business owners find themselves at a ‘critical tipping point’, according to Nicola Clark, Restructuring & Insolvency Partner at Azets.
May 2024 saw more than 270 compulsory liquidations, more than in the previous month, suggesting that suggesting business owners are not taking advantage of engaging in the restructuring process as soon as possible to preserve jobs or business units.
Nicola Clark explains:
“Business owners now find themselves at a critical tipping point, as the rate of growth in company administrations slows. The number of registered company insolvencies in England and Wales in May 2024 was 2,006, 6% lower than in April 2024 (2,144) and 21% lower than the same month in the previous year (2,547 in May 2023). This suggests a window of opportunity for more companies to be rescued, provided they engage in the restructuring process early.
“However, the rise in liquidations remains alarming. In May 2024 there were 271 compulsory liquidations, 1,590 creditors’ voluntary liquidations (CVLs), 126 administrations and 19 company voluntary arrangements (CVAs). The number of compulsory liquidations was lower than in May 2023, but higher than in April 2024. This upward trajectory could ease if more companies facing administration utilise available restructuring tools to preserve jobs and salvage some or all the business.
“As inflation continues to ease and in anticipation of a potential interest rate cut by the Bank of England, business owners are likely feeling more optimistic than they have done for a long time. Analysing insolvency statistics now requires a deeper examination of trends than we have needed to since the pandemic began. Factors such as inflation, energy prices and spiralling business costs have been significant contributors to business failures over the past four years.
“Despite renewed optimism, businesses still face considerable challenges. The cost-of-living crisis is likely to curb consumer spending for some time. Yet, there is some short-term relief at least for those more vulnerable sectors such as hospitality and leisure, with warmer weather and a summer filled with major sporting events including Euro 2024 and the Olympics providing a much needed-boost to incomes, after a tough Christmas trading period and poor weather so far this year.”