South West insolvency rates remain high

Recent reports indicated a concerning surge in insolvency cases in the South West during the second quarter of 2023, but are things settling down in the latest quarter?

The Q2 insolvency statistics painted a picture of business instability in the region, which was at that point classed as the most unstable in the UK following a rapid increase in business instability.

An analysis by R3, the insolvency and restructuring trade authority, of CreditSafe data shows that in July there was nearly a 40 per cent spike in corporate insolvencies when compared to the same period last year.

This figure translates to 166 incidents in just one month, outstripping all other UK regions in terms of year-on-year increase.

The next highest region was the South East which saw a rise of 33.3 per cent, followed by Scotland with an increase of 30.8 per cent.

This surge underscores an exacerbation of trading circumstances influenced by elevating interest rates, high inflation and an ongoing cost of living crisis.

It is also reflected in the Insolvency Service national statistics which recorded 6,342 companies as insolvent in Q2 of this year, which represents a 13 per cent rise compared to the same period the previous year.

This marks the highest rate of insolvencies since the second quarter of 2009. However, since then new national data shows that insolvency rates, while still high, may be falling.

In the third quarter of 2023, there were 6,208 seasonally adjusted corporate insolvencies, marking a decrease of approximately 2 per cent from the second quarter’s total.

However, the latest figures still represent a 10.2 per cent increase from the third quarter of 2022, which saw 5,635 insolvencies.

Additionally, the insolvency figures for the third quarter of 2023 were 54.8 per cent higher than those in the same period of 2021, which stood at 4,010, and 41.3 per cent above the pre-pandemic levels of 2019, which were 4,393.

Of those entering insolvency, the most common route chosen was creditors’ voluntary liquidations (CVLs) – reaching 5,240 cases in Q2 and 4,965 cases in Q3, accounting for 80 per cent of corporate insolvencies in the latest quarter.

CVLs, which are initiated by company directors to voluntarily shut down an insolvent business, have hit the highest quarterly figure since records began, demonstrating the difficulties faced and acknowledged by those running businesses.

R3 South West chair, Charlotte May, has emphasised the urgent need for businesses to vigilantly monitor their financial health and to respond swiftly at the first sign of trouble.

Engaging proactively with financial difficulties can potentially offer a broader array of solutions and better control over outcomes.

Given this precarious landscape, we believe businesses in financial distress should be talking to their advisers as soon as they can.

Leveraging our expertise in restructuring and insolvency and having a grounded understanding of the local business climate, we can guide directors through the necessary steps to secure the stability and future of their business so that they can survive and more importantly thrive.

To find out more about our specialist insolvency and business recovery services, please contact us.

Posted in Insolvency, News, Newswire.