The insolvency and restructuring trade body, R3, has provided its insights on the latest insolvency statistics for July 2024. Although there is a noticeable decrease from last month, the figures remain the highest for July since 2019.
Corporate Insolvencies on the Rise
According to Jodie Wildridge, deputy chair of R3 in Yorkshire and a barrister at Exchange Chambers in Leeds, corporate insolvency figures for July 2024 have decreased compared to the previous month. However, these numbers are still the highest for any July since 2019. This increase is largely driven by rises in Compulsory Liquidation, Administration, and Creditors’ Voluntary Liquidation (CVL) numbers compared to July 2023 and 2019.
CVLs remain the most common corporate insolvency process, though their numbers have fallen compared to last month and July 2022. These processes are predominantly utilised by smaller businesses. Their increased uptake compared to July last year and July 2019 reflects the challenging trading conditions these businesses have faced over the past four years.
Positive Signs for Business Rescue
The rise in administration figures compared to last year could be a positive indicator for business rescue prospects. This highlights the importance of early advice in exploring rescue plans. Meanwhile, the increase in Compulsory Liquidation figures demonstrates the financial pressures creditors are under.
Recent improvements in market and economic conditions, driven by a successful summer of sport and enhanced stability following the General Election, have resulted in better trading conditions for retail, hospitality, and construction businesses. The construction sector, in particular, is expected to benefit further from the government’s planned housing and infrastructure initiatives, though these will take time to have a noticeable impact.
Impact on Smaller Businesses
Smaller businesses have been hit particularly hard by the challenging trading conditions of the past four years. They are more likely to utilize processes like CVLs, which have seen increased uptake compared to previous years.
Improvements in the overall economic climate should result in greater acceptance and success of rescue proposals. Businesses of all sizes are showing a growing interest in Restructuring Plans, which bodes well for the profession.
The better trading conditions observed recently are expected to continue benefiting smaller businesses, although challenges remain.
Personal Insolvencies: A Mixed Picture
For personal insolvencies, the figures for July 2024 present a mixed picture. There is a decrease from last month but an increase compared to July 2023. Notably, the figures are lower than those from July before the pandemic. This monthly fall is primarily driven by decreases in Debt Relief Orders (DRO) and Bankruptcies.
The number of people entering an Individual Voluntary Arrangement (IVA) has risen this month. Changes in DRO eligibility and the removal of its administration fee have also influenced the uptake of this process compared to a year ago.
Breathing Space Program
Breathing Space numbers have increased compared to June 2024. This highlights the ongoing debt challenges faced by individuals in England and Wales.
When considered alongside the slight fall in personal insolvencies seen month-on-month, the combined figures for both processes are higher than they were in June of this year.
Consumer Behaviour and Spending
Despite concerns about the cost of living, consumers are cautiously optimistic. They are spending more on experiences while remaining wary of making major purchases.
This cautious optimism is reflective of the general sentiment in the market, with consumers balancing their spending habits carefully.
Advice for Those Facing Financial Issues
R3 advises individuals and businesses facing financial challenges to seek advice early.
Early advice offers a wider range of options and more time to address financial issues before they escalate.
R3’s analysis of the July 2024 insolvency statistics underscores the ongoing financial pressures faced by businesses and individuals. Early intervention and seeking professional advice remain crucial to navigating these challenges.
