R3 has commented on the June 2024 corporate insolvency statistics, revealing trends and concerns.
- June 2024 saw a rise in corporate insolvencies, driven largely by an increase in Creditors’ Voluntary Liquidations.
- Compulsory liquidations also rose to their highest level since January 2021, indicating a tougher stance by creditors.
- Despite these numbers, there was an increase in Company Voluntary Arrangements and Administrations, pointing to potential business rescue opportunities.
- Retail and hospitality sectors continue to struggle, with cautious consumer spending and high operating costs.
June 2024’s insolvency statistics indicate a significant rise in corporate insolvencies, primarily due to Creditors’ Voluntary Liquidations (CVLs). Smaller businesses often resort to CVLs due to cash flow problems or difficulties in accessing finance. Furthermore, compulsory liquidation numbers are at their second-highest since January 2021, suggesting creditors are adopting a tougher stance this year.
However, there are some bright spots in the data. The statistics reveal increased numbers of Company Voluntary Arrangements (CVAs) and Administrations compared to the previous month. Administration numbers are also higher than in June of both 2023 and 2019. The profession aims to rescue businesses wherever possible, and this rising trend in Administrations signifies a growing willingness among secured creditors to support rescue proposals.
Despite these positive indicators, businesses still face high costs and cautious consumer spending. Even with improving economic data pointing to growth and falling inflation, the trading environment remains challenging. Retail sales rebounded in May but are still down year-on-year. Restaurant spending also declined last month as consumers continue to save money and limit discretionary spending.
Interestingly, the construction sector showed signs of recovery, with growth in May after a slow start to the year. Delays in new work at the end of 2023 and election-related uncertainty had initially hampered the sector. The new Government’s pledges to invest in infrastructure and encourage housebuilding could potentially rejuvenate this industry if implemented effectively.
The statistics highlight long-standing high levels of CVLs, mainly affecting SMEs. The new Government’s policies, including business rate reforms and measures to tackle late payments, may benefit these businesses. However, these changes will take time to implement and might come too late for those currently struggling.
Notably, many businesses remain optimistic about the future despite ongoing challenges. Lower inflation and prospects of higher sales and profits boost their confidence. Nevertheless, concerns over customer demand, staff turnover, and regulatory requirements persist. The full impact of the General Election on the economy and purchasing decisions is yet to be seen.
On the personal insolvency front, June 2024 saw a rise in total personal insolvencies compared to previous months and the same period last year. Debt Relief Orders (DROs) surged, driven by the removal of the entry fee in April. Additionally, Individual Voluntary Arrangements (IVAs) saw month-on-month and year-on-year increases. DRO numbers are expected to rise further with recent changes in debt eligibility.
The cost of living crisis continues to affect many, with high prices for food, fuel, and energy. While inflation and food prices are decreasing, consumers have yet to see tangible financial benefits. Cautiousness in spending on major purchases remains prevalent as people worry about the future economy.
It remains crucial for individuals and businesses facing financial distress to seek advice from qualified sources early. This proactive approach can provide more options and time to make informed decisions before the situation worsens.
The June 2024 insolvency statistics paint a mixed picture, with both challenges and opportunities for businesses as they navigate the current economic landscape.