R3 responds to Q2 2023 insolvency statistics

There were 6,342 seasonally adjusted corporate insolvencies in Q2 2023 – a 8.9% rise compared to Q1 2023’s total of 5,824.

  • Corporate insolvency levels for Q2 2023 were 13.1% higher than Q2 2022’s figure of 5,606, 105.8% higher than Q2 2021’s total of 3,082, and 44.7% higher than Q2 2019’s total of 4,382.

There were 26,390 seasonally adjusted personal insolvencies in Q2 2023 – a 7.9% decrease compared to Q1 2023’s total of 28,644.

  • Personal insolvency levels for Q2 2023 were 11.5% lower than Q2 2022’s figures of 29,819, 3.1% lower than Q2 2021’s total of 27,237, and 12.1% lower than Q2 2019’s total of 30,013.

Nicky Fisher, President of R3, the UK’s insolvency and restructuring trade body, responds to the Q2 2023 England and Wales personal and corporate insolvency statistics, which were published today by the Insolvency Service: “Corporate insolvencies have hit a 14-year high this quarter – and this is due to a rise in Creditors’ Voluntary Liquidations, administrations and Company Voluntary Arrangements. Although Compulsory Liquidations have fallen compared to the last quarter, numbers for this process are the highest we’ve seen in the second quarter of the year since 2019.

“More and more businesses are running out of road or rope. Directors are choosing to close down their firms while the decision is still theirs, while an increasing number of creditors – including HMRC – are turning to winding-up petitions to recover the debts they’re owed.

“When the pandemic ended, many directors thought and hoped things would improve, but instead they’ve faced rising costs, supply chain issues and a customer base that is tightening its purse strings to cope with the cost of living.

“Business owners remain worried about customer demand, rising costs and the state of the economy, while high interest rates may affect access to rescue funding and could deprive saveable firms of a lifeline. Unless the economic picture improves, it’s likely more businesses will need an insolvency process to help resolve their financial issues, and numbers will remain high throughout the rest of this year.

“Turning to personal insolvencies, the trend we’ve seen is down to a fall in Individual Voluntary Arrangement (IVA) numbers – which suggests that the ongoing cost of living crisis isn’t translating into more people requiring a personal insolvency process at present.

“However, the rise in bankruptcies and Debt Relief Orders suggests that more people are unable to make almost any kind of contribution to repaying their debts this quarter, so have turned to these processes in an attempt to resolve their financial issues.

“Making ends meet is still a key concern for many. People are living in a world where it costs more to keep a roof over their head, put food on the table and keep the lights on, so they’re only spending money on the essentials. Alongside their money worries, job security and the health of the economy are key concerns for many people – while rising interest rates could affect their ability to pay or secure mortgages in the future, and inflation levels will continue to push costs up.

“An increasing number of people are turning to credit cards to pay bills or pay for the basics, which is concerning as people in this position are just one financial shock – like an unexpected bill or a cut in hours at work – away from becoming insolvent.

“Anyone who is worried about their business or personal finances should seek advice as soon as possible. Money worries are one of the hardest topics to talk about, but having that conversation while your concerns are fresh gives you more time to make a decision, more potential solutions for your issue, and usually leads to a better outcome than if you’d waited till the problem became more serious.

“Most R3 members will give potential clients a free consultation to understand more about them and their financial issues and outline the potential options open to them to resolve them.”

EY comments on today’s company insolvency statistics for Q2 2023

“Quarterly company insolvencies reached over 6,300 for the first time since 2009 in Q2 as many businesses struggled to contend with a sustained mix of pressures.

“Although company insolvencies have been steadily increasing over the last 18 months, largely driven by Creditors’ Voluntary Liquidations (CVLs), in Q2 there was a significant uplift in the number of compulsory liquidations which rose 67% year-on-year.

“The current low-growth, high-inflation and relatively high interest rate environment has meant many businesses have faced building pressure over the last 12 months which is now translating into distress.

“The increasing cost of refinancing options available to companies in this higher interest rate environment are now having a direct impact on profitability. According to EY-Parthenon’s latest Profit Warnings report found that nearly one-in-five UK-listed companies issued a profit warning in the last 12 months, with 20% citing tighter credit conditions – the highest level since 2008.

“As we’ve seen with previous economic downturns, an increase in restructuring activity traditionally comes after a peak in profit warnings with many businesses looking to implement restructuring plans as a rescue solution rather than insolvency. In Q2 there was a 34% year-on-year rise in Administrations and there’s likely to be a further uplift in restructuring in H2 2023 as businesses look at options to safeguard their long-term survival.

“The tighter lending environment will have an ongoing impact on profitability so it’s imperative that businesses continue to build solid operational and financial foundations as well as conduct robust forecasting to ensure they are fully equipped to adapt to changing conditions in their market.”

Samantha Keen, UK Turnaround and Restructuring Strategy Partner at EY-Parthenon

Personal Insolvency fall to lowest level since Q3 2020

The number of individuals entering a personal insolvency procedure has dropped to its lowest quarterly level since Q3 2020. This is heavily fuelled by a reduction in IVA registrations in the quarter.

The seasonally adjusted figures, released today by the Insolvency Service, reveal that there were 26,390 individuals entering either bankruptcy (1,826) a debt relief order or DRO (7,106) or an individual voluntary arrangement or IVA (17,458) in Q2 2023.

IVA numbers were down 12% on the previous quarter and dropped 22% when compared to the same quarter in 2022. For the second quarter running, DRO numbers broke the 7,000 barrier, increasing 1% in the period and by 23% when compared to the same quarter in 2022.

Interestingly however, bankruptcy numbers rose for the second successive quarter and recorded the highest number since Q4 2021.

Andy Nalliah, personal insolvency partner at RSM UK said: ‘IVA registrations have dropped significantly when compared against both the previous quarter and the same quarter last year. This could suggest the pandemic trend of higher-than-normal IVA registrations is now slowing. Furthermore, despite a recent slowdown in inflation, energy prices and the cost of groceries, the drop in IVAs could reflect the debtor’s lack of confidence in their own ability to service the financial commitments associated with an IVA.

‘Many people will be starting to feel the bite of hiked interest rates as their fixed term mortgages come to an end and this could be a key driver behind the 22% drop in IVAs compared to the same quarter last year.

‘On the flip side, albeit on a lesser scale, bankruptcy numbers have risen by 4% in the quarter and by 11% when compared to the same quarter last year. This is a further sign of creditors acting upon their previously re-evaluated credit and debt recovery strategies.

‘This aligns with the Insolvency Service’s bankruptcy figures for the quarter, which found 19% have arisen because of creditor petitions; up from 18% in the previous quarter and 16% in the same quarter in 2022. Furthermore, the Insolvency Service report that the actual number of creditor petitions in the quarter is up 10% on the previous quarter and 30% on the same quarter last year.

‘Unsurprisingly DRO numbers remain high, and the quarterly number of 7,106 registrations represents a 1% increase on the previous quarter and a huge 23% increase on the same quarter last year. When compared against pre-pandemic numbers, and perhaps more pertinently against DRO numbers prior to the eligibility thresholds being increased in the summer of 2021, it is likely that the increase in DRO registrations is those at the higher end of the criteria. By extension therefore, it is likely many of these DRO registrations are for debtors who would otherwise have become bankrupt; perhaps explaining in part the lower levels of bankruptcy numbers.’

UK insolvencies reach highest level in 14 years in Q2 2023

The number of registered company insolvencies jumped 13% in Q2 2023 compared to Q2 2022, and reached the highest level since Q2 2009, according to figures released today. Q2 2023 figures are also 9% higher than in Q1. However, the number of insolvencies is expected to fall towards the end of 2023, predict restructuring advisers at RSM UK.

The figures show between 1 April and 30 June 2023, there were 6,342 company insolvencies, made up of 5,240 creditors’ voluntary liquidations (CVLs), 637 compulsory liquidations, 409 administrations and 56 company voluntary arrangements (CVAs). CVLs are at their highest since the time series began in 1960.

Commenting on the latest figures, Lindsey Cooper, partner at RSM UK Restructuring Advisory, said: ‘The large rise in total insolvencies is not surprising as 83% of them relate to small businesses entering into a liquidation process where directors of these companies have decided that they have exhausted all recovery options and have no alternative but to cease trading. Many of these businesses have high levels of debt on their balance sheets and little or no reserves. They have managed to hold on up until now with the help of the Covid support measures.

She added: ‘With the rise in interest rates and hikes in inflation, businesses that previously benefitted from cheap loans and ran on very small margins are now facing significant challenges especially when it comes to renewing bank facilities or refinancing. We expect the number of liquidations to continue to increase in the short term.

‘The cost of finance is also impacting larger businesses and there is a steep rise in CVA and administration numbers in the quarter. The number of administrations has increased by 95 (30%) over the last quarter and the number of CVAs by 18 (47%). We expect this trend to continue as businesses make use of these corporate rescue procedures, including the new restructuring plan process, to restructure their balance sheets. There is some good news in that inflation is falling, however, whilst goods inflation is falling fast which is positive for manufacturers and construction, wage inflation is stickier, so it is likely that services industries where labour is a major cost, will find conditions more challenging.’

Report Finds Email is Vital for Government Communication but Security and Interoperability Raise Concerns

Digital communications provider Zivver has today released its Public Sector Freedom to Focus report, which explores the importance of data protection and technological interoperability in local and central government.

The report found that 98% of local and central government employees rely on email to get the job done because it is universal and requires little training and implementation. However, IT leaders are all too familiar with the security flaws, with 45% of those surveyed concerned about data loss through email errors. This is supported by findings from the ICO, which showed that, of the incidents reported by government bodies, the majority were due to human error. Despite all this, 91% of those questioned consider email to be the most secure method of communication.

Adam Low, CTO at Zivver: “It is paramount that public facing bodies uphold the highest standards of data protection and privacy. As we have seen with recent incidents, a breach can have severe consequences for individuals and communities, eroding trust and potentially leading to identity theft and other forms of fraud being launched against them. This harms not only those directly impacted but also undermines public trust in the ability of governments to protect their personal data.”

Other highlights from the report include:

  • 53% of IT leaders believe that smart technologies are key to progressive risk management
  • 58% think that bureaucracy and ‘process overload’ are barriers to focusing on core tasks
  • 42% of IT leaders feel there are too many different IT systems across organisations
  • 87% of IT leaders would experience a morale boost and better productivity if their organisation invested in technology to reduce email data security concerns

While security is a primary concern, it is also important that public sector organisations can digitally transform and communicate more effectively across different services. However, there are barriers to interoperability with unnecessary bureaucracy and inflated IT systems. Added to this, government entities continue to face recruitment challenges, especially in digital skills. A report published by the NAO details that only 4% of civil servants are digital professionals, which presents issues for IT leaders looking to empower employees to work efficiently and securely.

Low added: “In the absence of skilled professionals, public sector bodies can empower their existing workforce with the tools to work effectively. Unfortunately email in its main form lacks data loss prevention functionally, large file transfer capabilities, recall functionality, expiration controls and multi-factor authentication. While it performs a function to bridge the gap for siloed teams, it must be enhanced to ensure communications are protected before, during, and after sending.”

Scotland insolvency statistics Q1 2023, R3 in Scotland response

Corporate insolvency numbers (liquidations and receiverships) in Scotland for Q1 2023-2024 increased by 19.7% compared with Q1 2022-2023, to a total of 292.

  • Corporate insolvency numbers in Scotland also increased by 21.7% when compared to pre-pandemic levels in 2019.

The number of corporate insolvencies (liquidations and receiverships) in Scotland for Q1 2023-2024 decreased by 15.6% compared with the previous quarter’s total of 346 (January-March 2023).

Overall, personal insolvency numbers (bankruptcies and protected trust deeds) in Scotland for Q1 2023-2024 increased by 2.9% compared with Q1 2022-2023, to a total of 2,098.

  • Personal insolvency numbers in Scotland also decreased by 40.5% when compared to pre-pandemic levels in 2019.

The number of personal insolvencies (bankruptcies and protected trust deeds) in Scotland for Q1 2023-2024 increased by 9.5% compared to the previous quarter’s total of 1,916 (January-March 2023).

Commenting on the Scottish Insolvency Statistics, Q1 2023-2024 (1 April 2023 to 30 June 2023), Tim Cooper, Vice President of insolvency and restructuring trade body R3 and Partner at Addleshaw Goddard, said: “The yearly rise in corporate insolvencies has been driven by a rise in the number of Compulsory Liquidations which can likely be attributed to the end of the temporary legislation that altered the process and criteria for these.

“Creditors’ Voluntary Liquidations are also almost 140% higher than they were in 2019 as a combination of the aftereffects of the pandemic and the challenging economic climate mean more and more directors are choosing to close their businesses before that choice is taken away from them.

“Despite the quarterly fall in corporate insolvencies, the past few months have continued to test the resilience of Scottish businesses, with rising inflation, stagnant economic growth, and persistent uncertainties around consumer spending and footfall just some of the issues they have had to contend with. Some sectors have managed to adapt, but for many businesses it’s been tough to keep up with the rising costs while still making enough profit.

“As living expenses rise, more people are requesting pay rises. This presents a delicate balancing act for businesses as they must consider taking care of their employees’ financial needs while also balancing their own books, and it’s a tough challenge to navigate.

“Despite these issues, there is a shared determination to get back on track. As the summer tourist season approaches, there’s been a surge in business confidence across Scotland and I’m hopeful that events like the Edinburgh Fringe and the UCI Cycling World Championships will bring further opportunities – particularly for the hospitality and leisure industries which are sorely needed after a tough year.

“While Scotland may narrowly avoid a recession this year, directors will need to keep a vigilant eye on their finances and seek help if they notice any signs such as mounting debts, declining revenues, or rising stock levels as any of these may indicate their business is struggling.

“Turning to personal insolvency, the quarterly increase has been driven by a rise in both protected trust deeds and bankruptcies. The year-on-year increase has been driven by a rise in bankruptcies, which have reached their highest level since Q2 2020-2021.

“The decrease in personal insolvencies when compared to pre-pandemic levels should be treated with some caution. This could in part be attributed to a bottleneck effect caused by a high volume of cases outstripping the availability of support. This backlog may be temporarily suppressing the numbers.

“Times are tough for personal finances in Scotland. Rising rent payments are a huge concern at the moment, with tenants in Glasgow and Edinburgh now using over a third of their wages just to pay for housing. For Edinburgh particularly (as reported by BBC Scotland this morning), the position for renters is made more difficult by a decreasing availability of homes to rent as landlords appear to be putting more properties on the market for sale as interest and other costs escalate, only leading to further pressures on rising rents. Homeowners with high loan-to-income ratios are also facing challenges as interest rates go up and their mortgage payments become even more expensive.

“On top of that, the cost of food, fuel and energy are still really high, adding further strain to already tight budgets. This burden is even more pronounced for people in rural areas, as transport costs have contributed to even higher prices for essential items like food and fuel compared to urban areas.

“With wages struggling to keep up with inflation, low-income households are being hit hard by the increased cost of living. Most of their wages are already going towards essential expenses, so with prices going up there’s just nothing left at the end of the month, and some are even resorting to credit cards and loans to bridge the gap.

“If you’re struggling with debt or financial worries – whether as a business or an individual – it’s important to act as early as you can. Dealing with financial distress can be daunting, but by reaching out for help at the first signs of trouble you give yourself more time and more options to resolving your concerns.

“Most R3 members will provide a free initial consultation to discuss your situation and outline the potential options open to you to resolve it.”

Rise in Scottish corporate insolvencies unsurprising, with more to come as creditors lose patience

“The number of corporate insolvencies in Scotland eased on last quarter, but is still around 20% up compared to the same period during 2022. That is unsurprising given the vast changes in the economic landscape over the past 12 months and the huge increase in compulsory liquidations suggests there could be more to come. I have seen a significant upturn in creditor-led petitions in the last few weeks, as they lose patience with debtors and look to call in the money they are due.

“There have been some high-profile cases of firms going into financial distress in recent months, so it is likely the number of insolvencies will remain elevated compared to levels we saw during and prior to the pandemic. This is particularly true of many businesses finding themselves approaching the point where they have to refinance on very different terms, given where base interests are.

“Directors should be as proactive as they can with their businesses, bringing in any debts owed to them where possible before there is any further deterioration in the economic backdrop. Professional advisers can also support them through immediate credit pressures and help steer their businesses towards long-term survival.”

David Alexander, head of debt recovery at Gilson Gray

Recognise Bank Unveils Two New Notice Business Savings Accounts with Highly Competitive Rates

Recognise Bank is thrilled to announce the launch of two new business savings accounts, offering highly competitive interest rates to help SMEs grow and manage their finances effectively. The 7 Day and 35 Day Notice accounts provide better interest rates than their Easy Access counterparts, whilst enabling businesses to access their funds with relative speed, should they need to.

Business 7 Day Notice Account, at an impressive 3.15% AER (Annual Equivalent Rate) and with a Monthly Gross Rate at 3.11%. With this account, businesses can access their funds by providing just 7 days’ notice.

The second addition is the Business 35 Day Notice Account, offering 3.25% AER and with a Monthly Gross Rate at 3.20%. With this account, businesses can access their funds by providing just 35 days’ notice.

In addition to the attractive interest rates and flexible access to funds, and unlike many savings accounts, customers can choose to have their interest paid into their nominated UK bank account either annually or monthly, offering further convenience and customisation.

As always, Recognise Bank remains committed to ensuring the security and peace of mind of its customers. Both these new business savings accounts are FSCS protected up to £85,000, safeguarding businesses hard-earned savings against any unforeseen circumstances.

“We are excited to introduce these new business savings accounts, providing UK SMEs with highly competitive rates and the flexibility they need to manage their finances efficiently,” says Monna Patel, Head of Savings at Recognise Bank. “At Recognise Bank, we are dedicated to supporting businesses and helping them achieve their financial goals.“

Intrum Adopts Aryza Control to Advance Credit Management and Market Leadership in the Netherlands

Intrum, Europe’s largest credit management service provider, partnered with Aryza Group, a leading provider of financial software solutions, to leverage its cutting-edge software solution, Aryza Control to automate its business processes, improve performance, and establish a strong market presence in the Netherlands.

As part of its strategic mission, Intrum aims to become the market leader in Belgium and the Netherlands. Intrum has recognised its clients’ evolving needs and expectations in recent years and is committed to sustainable growth aligned with their requirements.

Aryza Control has been instrumental in enabling Intrum’s growth trajectory by automating various aspects of the business and enhancing overall performance. Intrum cooperates with numerous bailiffs for judicial collection when amicable collection attempts prove unsuccessful. To objectively evaluate the performance of bailiffs handling ongoing files, Intrum leverages Aryza Control with half a million claims meticulously recorded in the software, making the information derived from it key.

The importance of the information obtained from Aryza Control cannot be overstated. Intrum is increasingly engaging in agreements with bailiffs to determine the feasibility of amicable collection for certain files, aiming to save consumers from unnecessary costs. Aryza Control serves as a transparent solution in these situations, enabling objective evaluations based on mutually agreed-upon data. By leveraging Aryza Control, Intrum gains greater control across the entire chain of activities, ranging from debtor management and amicable collection to judicial collection.

Aryza Control provides Intrum with invaluable insights by unlocking critical operational and financial data reported by bailiffs. This information is crucial for Intrum to assess the financial impact during the judicial collection stage, in line with its commitment to sustainability. Additionally, Intrum actively engages in discussions with its clients about the importance of socially responsible debt collection and strives to minimise the reliance on judicial processes.

The implementation of Aryza Control empowers Intrum to distinguish between individuals who are genuinely unable to pay and those who are unwilling to fulfil their obligations, enabling them to make informed decisions regarding the most suitable collection options for different cases. The transparency provided by Aryza Control significantly enhances Intrum’s ability to address inquiries and concerns related to judicial recovery, thereby improving overall transparency and performance.

Erik Koch, Aryza Benelux General Manager commented “By adopting Aryza Control, Intrum is taking proactive steps to streamline its operations. The collaboration between Intrum Netherlands and Aryza Group showcases their mutual dedication to leveraging cutting-edge technology to meet the evolving needs of its clients and fostering sustainable growth to drive positive change in the credit management industry.”

Guy Colpaert, Managing Director at Intrum Benelux, said This strategic collaboration enables us to automate our business operations, enhance performance, and establish a prominent market presence in the Netherlands. Aryza Control provides us with unprecedented transparency and control across the entire collection process, allowing us to make informed decisions, improve efficiency, and deliver exceptional results.”

UK small businesses owed £32.1bn in late payments, with many considering using personal savings to prop up their business, report finds

A new report has revealed that more than a quarter (26%) of small business owners in the UK believe that they will be forced to cease trading if the outlook for their business does not improve – a potentially detrimental blow to the UK economy.

The SME Insights Report, published by small business insurance provider Simply Business, also found that 48% of SME owners believe the rising cost of living is the most glaring challenge facing their business. Over half (63%) say that rising taxes, interest rates, and inflation are eating into profit margins, with many also grappling with trying to claw back thousands of pounds in unpaid bills.

Over half (52%) of SMEs anticipate a decrease in profits by up to 20% in 2023, with customer retention (26%) and lack of funding (25%) cited as factors affecting business. It comes as the Bank of England drives up interest rates to the highest level since the 2008 financial crisis, making access to financing near impossible for many small firms.

Skyrocketing energy costs

Further questions remain about the long-term effects of the increased cost of energy. Over a quarter (26%) of SMEs are now spending up to 40% more on energy each month compared to the previous year, with some reporting an astonishing 150% increase in their monthly energy expenses.

With reduced government support since April 2023 and many businesses locked into high-energy tariffs, challenges with unpredictable fluctuations in price remain set to persist.

Annelise Sealy, owner of The Fall Bride in Hackney, east London, said “Our building is modern spec, well-insulated, and our energy output is minimal. We don’t use any energy-intensive equipment and we run everything as efficiently as possible. And yet, over the course of the past year, our monthly bill has fluctuated between £100 and £1100 despite us doing nothing differently.

“There hasn’t been any clarity offered on what the long term solution is. Without a clear view on the monthly outgoings of the business, I simply cannot plan.”

Resilience measures adopted by SMEs

To combat unfavourable financial conditions, SMEs are employing various resilience measures. Over a quarter (27%) are resorting to using personal savings to prop up their business, nearly a third (29%) of businesses seeking bank loans and 23% seeking a loan from family and friends to support their operations.

Meanwhile, two thirds (62%) state that they plan to increase prices in the next six months in order to stay afloat during these tricky economic times, showing a 13% rise when compared to 12 months ago. Other measures include holding off employing new hires (23%) and putting expansion plans on hold (22%).

Jonathan Portes, Senior Fellow of the Economic and Social Research Council and Professor of Economics and Public Policy at King’s College London said “Two themes emerge from this report. First, the extent of the continued pressures on SMEs from the wider economic environment. While the energy price spike has abated, and labour shortages have eased somewhat, more generalised inflationary pressures mean that SMEs are being squeezed from both ends, with some input costs rising and consumer demand impacted as real incomes have fallen. Recent rises in interest rates will exacerbate both.  Second, and more optimistically, the resilience of the sector despite all this; the vast majority of SMEs remain positive about their own prospects, not just for survival but for growth, and most also expect the economy to improve.

“The overall impression is of a sector that has adapted to the UK economy’s seeming near-permanent state of continual semi-crisis. Given the importance of SMEs to the overall economy, this should give some cause for – very cautious- relative optimism about the UK’s economic prospects over the next year, at least compared to some of the more gloomy forecasts of the last few weeks.”

Confidence amidst challenges

Despite the prevailing economic challenges, more than half (54%) of businesses remain optimistic that the UK economy will improve this year, and SME confidence continues to grow as three quarters  (77%) express confidence about their business prospects over the next six months.

Taylor Rutter, Contract Carpenter based in Northamptonshire said “Despite the challenges, I am feeling confident about the future of my business. My work is still in demand, and I have the unique advantage of being able to be flexible, which means that I can pick up extra jobs and take time off as and when I need.

“Having said that, I do think that the government should not rest on its laurels when it comes to SMEs – if the millions of small businesses in the UK are given the tools to succeed, then we will all feel the benefit.”

Alan Thomas, UK CEO at Simply Business “The stoic spirit of small business owners is the backbone of the UK economy – their resilience is vital to the nation’s recovery and growth. The fact that many SMEs across the UK are struggling so significantly is a serious cause for concern for the British economy and communities.

“Naturally, the impact on consumer purchasing behaviour is trickling through to the books of small business owners at a time when SMEs need our support the most. The reduced levels of cash-flow and liquidity will only make things worse for many. Small businesses sit at the heart of our communities and are vital to our economy, and it is essential that we continue to support them in these times of financial uncertainty.”