Figures released by the Insolvency Service show that the number of insolvencies for Q1 2024 were up on the same period in 2023, with 5,759 total insolvencies compared to 5,747 in Q1 2023. However, the number of insolvencies in March 2024 dropped by 17% compared to March 2023 but still remain higher than between 2014 and 2019.
Creditors’ Voluntary Liquidations (CVL’s) featured as the highest form of company insolvency at 79% in March 2024. This was followed by compulsory liquidations at 14%, Administrations at 6% and less than 1% were Company Voluntary Arrangements (CVA’s).
The number of Winding Up Petitions (WUP’s) have seen a big increase of 17% in Q1 2024 compared to Q1 2023. It seems that suppliers are beginning to take action to recover any debts due to HMRC pressing forward with more winding-up and bankruptcy petitions after the relaxation during the pandemic. This may have resulted in creditors taking more aggressive action hoping to improve their position in the queue for payment.
With the UK inflation rate decreasing to 3.3% following its high of 11.1% in 2022, we are beginning to see some signs of economic recovery. Costs are still at a record high and business rates are set to increase which will all impact those businesses trying to recover.
The three industry sectors most affected in the 12 months ending Q1 2024 were:
- Construction (4,403 insolvencies)
- Wholesale and Retail Trade and Repair of Vehicles (3,941 insolvencies)
- Accommodation and Food Services Activities (3,822 insolvencies).
The construction sector is currently accounting for 18% of total corporate failures in the last 12 months. Construction has always been vulnerable to insolvencies but we are seeing a big proportion of the overall company failures in this sector.
This could be due to the impact of the cost of materials which has increased significantly resulting in companies finding it difficult to operate profitably. This will inevitably impact suppliers to the industry as they end up with bigger debts and invoices not being paid.
There have been some significant recent failures within the secondary and tertiary subcontractor areas which will begin to feed up the line to the main contractors, which may see another significant main contractor facing insolvency in the near future.
“Despite the fact that we have seen a decrease in the March 2024 figures compared to March 2023, this quarter is still above the same quarter as 2023. The impact on the construction sector is a worrying trend due to the high cost of materials and this could impact smaller businesses connected to the sector.”
– Charles Brook, Director at Xeinadin.
