Company insolvencies on track for 14-year annual high after December rise

The number of companies in England and Wales that went bust in 2023 are on track to hit the highest annual level since the aftermath of the financial crisis in 2009 after a jump last month.

The Government’s Insolvency Service said 2,002 companies were declared insolvent in December, up 2% year on year and the highest December level for four years.

This sees the total for 2023 hit 25,159, up 14% on the 22,129 seen in 2022.

While the figures are subject to revision and not seasonally adjusted, it suggests the annual total is set to reach the highest level since 2009 in a sign of the pressures facing businesses.

The quarterly seasonally adjusted figures are set to be released on January 30.

Firms across the UK were hit by a barrage of costs last year, including higher interest rates, energy and staff wage bills, while also grappling with falling consumer confidence.

Nicky Fisher, president of insolvency and restructuring trade body R3, said the December figures “reflect the final month of a difficult year for businesses in England and Wales”.

She said: “December was tough for many firms as they faced additional expenses at a time when margins were already tight.

“These won’t have been helped by consumer spending slowing and rising energy costs.

“At the end of a tough year, these extra costs could have been the final blow for many businesses and may have led to their directors turning to an insolvency process to resolve their firm’s financial issues.

“If the New Year trading period hasn’t improved on the one before Christmas, we could see insolvency numbers continue to rise, as businesses who had banked on a festive income boost to cover the shortfall in their income turn to the profession for help.”

Experts warned that 2024 is likely to be a difficult year for UK businesses.

Lindsay Hallam, senior managing director in the corporate finance and restructuring team at FTI Consulting, said: “Despite expected headline inflation falling to near target levels in 2024, consumer prices remain 25% higher than 2021 levels, putting pressure on consumer finances and anticipated demand.

“Further, the impact of higher interest rates and debt availability are yet to be felt by many businesses who are still to refinance.

“The combination of these factors will lead to an increase in business distress and insolvencies in 2024.”

The latest monthly figures showed that creditor voluntary liquidations (CVLs) were largely behind the December rise in insolvencies, accounting for 1,731 of the total figure and up 5% year on year.

There was a drop in compulsory liquidations and administrations, down 18% and 8% respectively.