R3 responds to July 2023 insolvency statistics

Eleanor Temple, chair of the UK’s insolvency and restructuring trade body R3 in Yorkshire

• Corporate insolvencies decreased by 20.4% in July 2023 to a total of 1,727 compared to June’s total of 2,169, and decreased by 5.7% compared to July 2022’s figure of 1,831.

o Corporate insolvencies also increased by 57.6% compared to July 2021 and increased by 19.9% compared to July 2019.

• Personal insolvencies increased by 1.7% in July 2023 to a total of 8,268 compared to June’s total of 8,131, and decreased by 10.1% compared to July 2022’s figure of 9,202.

o Personal insolvencies decreased by 9.1% from July 2021’s total of 9,092, and also decreased by 32.5% compared to pre-pandemic levels in July 2019 (12,254).

Eleanor Temple, chair of the UK’s insolvency and restructuring trade body R3 in Yorkshire and a barrister at Kings Chambers in Leeds, responds to the publication of the July 2023 personal and corporate insolvency statistics for England and Wales:

“The fall in corporate insolvency levels is due to fewer businesses entering a Creditors’ Voluntary Liquidation. However, a large number of directors are still using this process to close down their businesses.

“Despite the monthly and yearly falls in corporate insolvencies, numbers are still well above pre-pandemic levels as the economic issues continue to bite businesses.

“Costs are rising at a time when people are cutting spending back, leaving businesses facing the challenge of squeezed margins and shrinking revenues and having to work out whether to absorb their cost increases or pass them onto their customers.

“Alongside these, requests for wage increases, and higher energy bills are also hitting businesses hard as the costs of cooling premises in the summer are just as challenging as keeping them warm in the winter. These are making firms more cautious about investment or recruitment – especially as the increased cost of borrowing will make raising funds for investment more challenging.

“As we move towards the end of the summer – a period of time which is traditionally quiet for a lot of companies – we urge directors to be vigilant to the signs of financial distress and act if any of them present themselves.

“If firms are having cashflow issues, problems paying rent, staff or suppliers, or seeing stock start to pile up, it’s likely they’re financially distressed – and in this scenario, their directors should seek advice as soon as possible.

“The monthly fall in personal insolvencies is mainly due to a reduction in IVA numbers. However, it’s worth noting that Debt Relief Orders are at a five month high, which suggests that the current economic climate is stretching personal finances to the point where professional help is needed.

“Rising prices are still hitting people in the pocket. Households are looking to save money wherever they can, and consumers are becoming increasingly concerned about the future of the economy and their own financial health.

“We’re hearing that people are turning to their savings to cover the basics and their bills, while credit lending is rising – and becoming more expensive – as people look to find a way of bridging the gap between their income and their expenses.

“News that food inflation is easing and energy costs are coming down should be positive for consumers, but whether this reduces the burden on household budgets or simply frees up funds to cover other expenses remains to be seen.

“We urge anyone who is worried about their personal or business finances to seek advice as soon as possible. It’s a very hard conversation to have, but you’ll have more options and more time to take a decision if you seek advice while your worries are at the early stage than if you’d waited till they became more serious.

“Most R3 members will give prospective clients a free consultation so they can understand more about their situation and outline the potential options open to them for resolving it.”

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