Insolvencies soar while festive hopes glimmerby
The number of registered company insolvencies this October was 18% higher than last year as experts say businesses are being “battered from all sides”. But the festive season offers a glimmer of hope.
This week the Office for National Statistics published the monthly insolvency statistics from October 2023.
“The number of registered company insolvencies in October 2023 was 2,315, 18% higher than in the same month in the previous year (1,954 in October 2022),” according to the report. This is primarily driven by creditors’ voluntary liquidations (CVLs), which accounted for 1,889 of company insolvencies.
Following the release of the Q3 insolvency figures, which stated that the past two quarters saw the highest number of corporate insolvencies since Q2 2009, it is not surprising that October’s insolvency statistics show a further increase.
This situation is expected to continue to deteriorate as businesses struggle with rising economic pressures.
“The removal of government support measures, compounded by increased interest rates, inflation-eroded margins and weak demand, have all combined to push thousands of businesses to the brink of collapse,” commented Julie Palmer, partner at Begbies Traynor.
Awaiting a Christmas miracle
As we anticipate the Autumn Statement alongside the upcoming Christmas trading season, there’s a glimmer of hope that these moments might offer some relief.
Nicky Fisher, president of R3, provided insights regarding the uncertainty that Christmas will bring for businesses. “Businesses are being battered from all sides. Costs have increased, demands for wages are incoming and people are spending less as they look to save ahead of the winter and to make sure they have enough left to cover the basics. If the Christmas trading period doesn’t bring a wave of new income, we could see insolvencies continue to rise in the new year and, at the moment, it’s impossible to predict whether this will be a badly needed boost or the final blow for struggling firms,” she said.
This is further echoed by Mark Supperstone, managing partner of ReSolve who commented: “Retail and hospitality are particularly suffering and many in this sector will be hoping for a strong Christmas trading period in order to survive.”
Supperstone also discussed the anticipation businesses have over the upcoming Autumn Statement. “Many companies in these struggling industries will be looking for support from the Chancellor in the Autumn Statement to give them a spark of hope for the year ahead, such as a reinstatement of VAT-free shopping for overseas visitors and offering first-time buyers more mortgage support.”
He added: “We hope that the Budget will contain some festive news for business owners and consumers.”
The next couple of months will therefore be crucial for the survival of businesses all over the UK.
Advice for struggling businesses
In the current climate of increasing company insolvencies, providing practical advice becomes crucial to help assist struggling businesses to navigate challenging times.
“Always seek advice early. The earlier you seek help, the more options we can find for your business, and the better chance you have of moving forward in 2024,” Supperstone said.
Fisher also provided guidance and highlighted the importance of directors recognising the signs of financial distress in order to act quickly. “Cashflow problems, stock piling up and issues paying rent, taxes or suppliers are all signs that a business is distressed and need to be acted upon before they get any worse – and while the business has as wide a range of potential solutions open to it as possible,” said Fisher.
“We know it’s a very hard conversation to have, but voicing your concerns while they are new will give you more options and more time to take a decision about your next step,” Fisher concluded.
Will the Autumn Statement and the Christmas trading season mark a turning point in curbing the rise of company insolvencies, or will we witness further challenges in the months ahead? Tell us what you think in the comments below.