Corporate insolvencies hit 30-year high in England and Wales in 2023

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Corporate insolvencies in England and Wales rose to their highest level since 1993 last year, according to official figures that lay bare the challenges facing companies amid slowing demand and high production costs.

There were 25,158 registered company insolvencies in 2023, up 13.7 per cent from the previous year — the highest number for 30 years, the Insolvency Service said on Tuesday.

The figures included 20,577 voluntary liquidations, 9 per cent higher than in 2022 and the highest number since the series began in 1960.

Corporate insolvencies are formal measures taken when a business can no longer pay its debts. The exceptionally high figures in 2023 reveal the multiple pressures on businesses as the economy stagnated last year while borrowing costs surged and wages rose.

Nicky Fisher, president of R3, the UK’s insolvency and restructuring trade body, said the “rising tide” of corporate insolvencies was the result of “a combination of increased costs, cautious spending, creditor pressure and the post-pandemic hangover”.

“Unless the economic picture improves, costs come down and people start spending, it seems likely that insolvency numbers will remain high this year,” she added.

Recent data have shown improvements in UK economic activity, and markets expect the Bank of England to cut interest rates from June after holding them at 5.25 per cent on Thursday.

Separate figures released on Tuesday showed mortgage approvals rising to a six-month high, while data released last week showed that business activity in January rose at the fastest pace in seven months.

But Simon Edel, UK turnaround and restructuring strategy partner at the consultancy EY-Parthenon, warned that “despite recent, more positive economic data, there is a growing divergence between companies capable of riding the wave of the recovery and those too entangled in financial or operational issues to benefit”.

Insolvencies rose to 53.7 per 10,000 active companies in 2023, up from 49.6 in 2022 — the highest level since 2014 — but this was still much lower than the peak rate of 94.8 per 10,000 active companies during the 2008/09 financial crisis.

Almost all sectors reported an increase in corporate insolvencies, with hospitality hit particularly hard as high inflation curbed household spending. There were more than 3,700 liquidations in the sector, up 37 per cent from the previous year. There was a 20 per cent rise in retail and wholesale trade insolvencies and an 18 per cent increase in the manufacturing sector.

The construction sector suffered the highest overall number of insolvencies. Kelly Boorman, national head of construction at RSM UK, said the sector had suffered from declining demand, supply chain disruption, surging material prices and labour shortages.

However, she added: “[In 2024] there is some reason for cautious optimism though, as interest rates stabilise and inflation continues to fall, meaning businesses will start to see funding becoming more readily available later in the year.”

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