Insolvency register shows surge in business failures

The recent surge in company insolvencies, especially driven by creditors’ voluntary liquidations, unveils a distressing post-pandemic reality.

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The latest report from The Insolvency Service reveals a staggering 21% spike in company insolvencies in November 2023 compared to the same period in 2022. The surge follows a challenging series of years marked by the COVID-19 pandemic, a cost of living crisis, and rapid inflation, which have collectively triggered a wave of businesses entering administration.

In November alone, a concerning 2,466 companies registered for insolvency, surpassing levels last seen during the government’s support measures in response to the pandemic.

All in all, 359 compulsory liquidations, 1,962 creditors’ voluntary liquidations (CVLs), 133 administrations, and 12 company voluntary arrangements (CVAs) were reported for this period.

Industry comment

Jeremy Whiteson, a Restructuring and Insolvency Partner at Fladgate, delved into these concerning figures. 

The data indicates a restrained use of administration and other rescue procedures, with Whiteson suggesting a broader impact of the challenges facing businesses, such as high borrowing costs, limited equity funding, tight labour markets, uncertainties in fuel and commodity prices, Brexit-related import/export difficulties, geopolitical uncertainty, and the aftermath of pandemic closures. 

He notes, “After this ‘death by a thousand cuts’, many companies may have no business left to save.”

Whiteson highlights the surge in CVLs in particular, attributing 80% of the total insolvencies to this procedure. 

CVLs, often adopted by companies with negligible business or assets, surged by 23% compared to the previous year and rose by 4% from the prior month. Often used by companies with no remaining business or material assets, CVLs are a procedure that signals significant financial challenges.

SOS signals going unheard

Fewer and fewer companies are using procedures meant to rescue their struggling businesses. Traditional methods of rescue are arguably not as effective as they used to be, in part due to challenges like increased formalities and higher costs linked to insolvency processes. 

Specifically, practices like pre-pack administrations – which previously helped small and medium-sized businesses – have faced financial obstacles that made it difficult for businesses to benefit from them. 

As a result, companies have recently been finding it much harder to navigate financial trouble and salvage their operations.

Written by:
Stephanie Lennox is the resident funding & finance expert at Startups: A successful startup founder in her own right, 2x bestselling author and business strategist, she covers everything from business grants and loans to venture capital and angel investing. With over 14 years of hands-on experience in the startup industry, Stephanie is passionate about how business owners can not only survive but thrive in the face of turbulent financial times and economic crises. With a background in media, publishing, finance and sales psychology, and an education at Oxford University, Stephanie has been featured on all things 'entrepreneur' in such prominent media outlets as The Bookseller, The Guardian, TimeOut, The Southbank Centre and ITV News, as well as several other national publications.

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