Insolvency Surge: Businesses Struggle Amidst Economic Pressures

New Statistics Show Rising Corporate Liquidations in England and Wales

The latest company insolvency statistics for England and Wales, released by the Insolvency Service, reveal a worrying trend for businesses. The figures for August 2024 show a total of 1,953 companies entering insolvency, which, although a 9% decrease from July 2024’s 2,144 cases, remains 15% lower compared to the same period last year, when 2,286 companies were affected.

Liquidations vs. Administrations

Of the 1,953 insolvencies reported in August, 279 were compulsory liquidations and 1,542 were creditors’ voluntary liquidations (CVLs). Meanwhile, 112 businesses entered administration, highlighting a significant gap between companies closing their doors permanently and those attempting to restructure. Lin Gartland, an insolvency practitioner with Azets, a top 10 accountancy and advisory firm in the UK, commented on the data, noting that these figures reflect the sustained financial pressures businesses have faced throughout 2024.

“These figures are not surprising given the economic headwinds businesses have been contending with. High interest rates, inflationary pressures, and tightened credit conditions continue to push companies, particularly SMEs, into financial distress,” Lin explained.

Sectors Facing the Brunt

Sectors like retail, construction, and hospitality have been hit hardest by these financial challenges. Many of these businesses, which survived the pandemic thanks to government support measures, are now grappling with the withdrawal of these lifelines. The long-term trend since 2022 shows a steady increase in corporate insolvencies, exacerbated by the evaporating financial cushions that loans and grants once provided.

What Lies Ahead?

Looking forward, the situation appears unlikely to improve in the near future. The Bank of England has held interest rates at 5%, and a cautious consumer market is expected to keep insolvency levels elevated for the rest of 2024 and potentially beyond. However, Lin highlighted the importance of early intervention, stating that businesses engaging with licensed insolvency practitioners early on have a better chance of survival.

“Liquidation is often the last resort. However, administration can be a lifeline for companies when tackled early enough. In many cases, administrations allow businesses to restructure and emerge stronger,” she said. For more information on how Azets can support businesses, visit Azets’ website.

About Azets

Azets is an international advisory, compliance, and outsourcing group, supporting over 100,000 clients across Europe with 189 offices. In the UK, Azets employs more than 3,800 people in over 70 offices, offering a range of services including accounting, tax, audit, and technology. Their proprietary digital workplace technology, Azets Cozone, provides SMEs with instant access to information that simplifies workflows and increases operational productivity. Azets is also a member of Allinial Global, an association of independent accounting and consulting firms dedicated to their members’ success.

For more information about Azets, visit their website.