28 April 2023
The number of registered company insolvencies soared by 18% in Q1 2023 compared to Q1 2022 according to figures released today. However, the number of businesses becoming insolvent is expected to fall in Q2 and throughout the rest of 2023, predict* restructuring advisers at RSM UK.
The figures show between 1 January and 31 March 2023, there were 5,747 company insolvencies made up of 4,739 creditors’ voluntary liquidations (CVLs), 652 compulsory liquidations, 318 administrations and 38 company voluntary arrangements (CVAs). The number of company insolvencies in Q1 2023 was 4% lower than in Q4 2022.
Commenting on the latest figures, Gareth Harris, partner at RSM UK Restructuring Advisory, said: ‘Despite recent predictions that the UK will avoid a recession in 2023, these figures highlight the difficult economic terrain many struggling businesses are still navigating. Stubbornly high inflation, (particularly in food), the highest interest rates since 2008, significant energy prices year on year and the inability to kick start UK productivity levels are all contributing to the financial challenges and ultimately insolvency levels.
‘The disappointingly high level of both types of shut down liquidation processes shows that those companies who have come out of the pandemic with additional debt and weaker balance sheets are encountering a toxic combination which in many cases is proving impossible to overcome.
‘But there is some room for optimism. By the end of 2023, we predict overall insolvency numbers will decrease by around 24% in Q4 2023 from their peak in Q4 2022. The drop is likely to come mainly from a fall in “shut down” Creditors’ Voluntary Liquidations where the catch-up from the low points of Covid and government support will largely be flushed out.
‘Despite these current high insolvency numbers our experience is that UK businesses are showing robustness and resilience despite the economic challenges and in the best-case scenario we believe the drop in insolvency numbers could be as large 28% from Q4 2022 to Q4 2023.