Harsh realities setting in as liquidation numbers rise – expert

A rise in liquidations during August reflect the harsh realities facing businesses, according to a leading insolvency practitioner.

The latest monthly insolvency statistics for England and Wales, released by the insolvency service, show that 1,953 companies entered insolvency, 9 per cent lower than in July 2024 (2,144) and 15 per cent lower than the same month in the previous year (2,286 in August 2023).

Of these, 279 were compulsory liquidations and 1,542 were creditors’ voluntary liquidations (CVLs).

Furthermore, 112 of these were administrations.

Andy McGill (pictured), from UK top 10 accountancy and advisory firm Azets, said the figures show a clear distinction between businesses that reach the end of their lifecycle and those with potential for recovery.

He said: “These figures are not surprising given the economic headwinds businesses have been contending with.

“High interest rates, inflationary pressures, and tightened credit conditions continue to push companies, particularly SMEs, into financial distress.

“The August 2024 numbers are reflective of these harsh realities, particularly in sectors like retail, construction, and hospitality, which have been hit hardest.

“The long-term trend shows that corporate insolvencies have been steadily increasing since 2022, exacerbated by the withdrawal of government support measures post-pandemic. Many businesses that survived during that period, with the help of loans and grants, are now facing reality as those financial cushions have evaporated.

“As we look forward, the pressure on businesses is unlikely to ease in the near future.

“The Bank of England has held interest rates at 5 per cent, and an increasingly cautious consumer market means that we may continue to see elevated insolvency levels into the rest of 2024 and beyond. That said, for businesses that act early and engage with licensed insolvency practitioners, there are paths to recovery.

“Liquidation is often the last resort. However, administration can be a lifeline for companies when tackled early enough.

“In many cases, administrations allow businesses to restructure and emerge stronger. Engaging with a licensed insolvency practitioner early on provides business owners with the best chance of survival and, in some cases, growth. Too often, companies wait until it’s too late to explore options beyond liquidation.”