Big drop in March corporate insolvency figures

Newly published statistics for England and Wales show corporate insolvencies were well down when compared to both February and this time last year.

Data from The Insolvency Service also showed a decrease in personal insolvencies over February by almost 19% and also down over last year.

The latest statistics for England and Wales show:

• Corporate insolvencies decreased by 16.6% in March 2024 to a total of 1,815 compared to February's total of 2,177 and decreased by 17.2% compared to March 2023's figure of 2,193.
• Corporate insolvencies decreased by 2.2% from March 2022's total of 1,856 and increased by 14.8% compared to pre-pandemic levels in March 2019 (1,581).
• Personal insolvencies decreased by 18.9% in March 2024 to a total of 8,708 compared to February's total of 10,740 and decreased by 9.3% compared to March 2023's figure of 9,598.
• Personal insolvencies decreased by 8.5% from March 2022's total of 9,514 and decreased by 28.7% compared to pre-pandemic levels in March 2019 (12,216).

Neil Stewart, chairman of R3’s Southern and Thames Valley region, said: “The biggest driver of the monthly and yearly fall in corporate insolvency numbers is a reduction in Creditors’ Voluntary Liquidations. However, numbers for this process and overall levels of corporate insolvency are still higher than they were pre-pandemic.

“High costs and constrained spending have continued to hit businesses hard in the first three months of this year. The latest available sectoral data shows that construction is currently the industry experiencing the highest levels of insolvency, with the figures for this sector for November 2023-January 2024 being slightly higher than they were in the same period last year.

“This has resulted from an increase in insolvency amongst companies working in the construction of residential and non-residential buildings, as well as in specialist construction activities.

“Delays in the commencement of construction in the three months to October of last year seem to be a major contributor. These delays will have affected main contractors and are likely to have had an even greater impact on those specialist construction firms whose work takes place in the later stages of construction projects.

“These specialist firms are also vulnerable to fluctuations in the cost of materials. There were also a number of high profile construction sector insolvencies in that period, triggering a cascade-effect through to this sector’s supply chain.

“While the wider trading climate is a challenging one, there are signs directors expect revenues to increase this year. Overall, the mood of the business community seems to be increasingly positive.

“However, it remains to be seen whether inflation falls quickly enough to benefit businesses, and whether the hoped-for increases in income outstrip rises in costs and wages.

“Directors and business owners need to continue to be alert to the signs of distress, and act on any such indications as they present themselves. Cashflow problems, unplanned increases in stock, and difficulties paying taxes or invoices are all signs a business is financially distressed and in need of remedial action.

Neil, a Regional Associate Director at insolvency litigation financing company Manolete Partners, added: “Turning to personal insolvencies, the monthly and annual fall in numbers – to the lowest figure we’ve seen in March since 2020 – is accounted for by a reduction in the number of people entering Debt Relief Orders and Individual Voluntary Arrangements.

“Breathing Space numbers have also fallen compared to last month and last year, but a significant number of people are still using this process to seek advice and take steps to resolve their financial problems.

“Despite the fall in personal insolvencies, the cost of living crisis and paying for basic expenses continue to be challenging for consumers. Food, fuel, heating and housing costs have all remained high, and people are cutting discretionary spending to make sure they have enough money to pay for the essentials.

“The future of the economy and the security of people’s finances are still major concerns, and many people are shying away from making major purchases as they look to save wherever and whatever they can.

“This situation isn’t expected to change soon. With household debts increasing, unemployment rising and real post-tax household income not expected to return to where it was before the pandemic until the end of next year, times will remain tight for many.”

Neil added: “We urge anyone who is worried about their finances to seek advice at the earliest possible opportunity. Money and money worries are two of the hardest topics to start a conversation about, but doing so at an early stage gives you more options and more time to decide on the way forward.

“Most R3 members will offer a free consultation to prospective clients so they can understand more about their circumstances and outline the potential solutions open to them to improve or resolve them.”