Company Liquidations in the UK

Company Liquidations in the UK have seen significant shifts from 2022 to 2023, marking a period of increased challenges for businesses across various sectors. In 2022, businesses were already grappling with the repercussions of higher energy prices. Supply chain issues, rising inflation, interest rates, and the total return of creditor actions against businesses. This environment led to an 11.8% rise in insolvencies and Members’ Voluntary Liquidations (MVLs) from the previous year, totaling 31,606 cases. Notably, every region in the UK, except London, recorded increased insolvencies, highlighting a broad impact across the country. The spike in creditors’ voluntary liquidations underscored the tough decisions many directors faced in closing businesses to preserve value for creditors rather than facing more distressed wind-downs​​.

The trend intensified in 2023, marking the year with the highest annual number of corporate insolvencies since 1993. A total of 25,158 registered company insolvencies were recorded, including 20,577 creditors’ voluntary liquidations (CVLs), 2,827 compulsory liquidations, 1,567 administrations, 185 company voluntary arrangements (CVAs), and two receivership appointments. The rate of company insolvent liquidation spiked to 53.7 per 10,000 active companies, the highest level since Q3 2014. This significant uptick in insolvencies across all tracked processes by the Insolvency Service underscores the profound challenges businesses faced, with CVLs increasing by 9% from 2022 and reaching the highest level since records began in 1960​​.

Company Liquidations in the UK

Compulsory liquidations in 2023 saw a 44% increase from 2022 but were still 4% lower than pre-pandemic levels in 2019. The number of administrations in 2023 was 27% higher than in 2022, although still 14% lower than in 2019. CVAs in 2023 were 67% higher than in 2022, indicating a significant rise from the lowest-ever annual total in the series since 1993, yet still 47% lower than in 2019. These figures suggest a nuanced picture of the business environment, with specific insolvency processes experiencing more significant increases than others​​.

Sector-wise, the impact was most felt in construction, wholesale and retail trade, accommodation and food service, administrative support, and professional, scientific, and technical activities. These sectors accounted for the most insolvencies, with construction leading at 18% of cases. The data illustrates how the accommodation and food service, wholesale and retail trade, and manufacturing sectors drove higher insolvency rates in 2023, reflecting the broader economic pressures on these industries​​.

This analysis portrays a challenging period for UK businesses, with rising insolvency rates reflecting the broader economic difficulties faced by companies across various sectors. The marked increase in insolvencies from 2022 to 2023 underscores the impact of the economic environment on business operations and the tough decisions many had to make in navigating these challenges.

A new year, a rising problem

In January 2024, the UK witnessed a 5% increase in registered company insolvencies compared to the previous month, totaling 1,769 cases. This rise includes various forms of insolvency, such as compulsory liquidations, creditors’ voluntary liquidations (CVLs), administrations, and company voluntary arrangements (CVAs). CVLs decreased from the previous year, while compulsory liquidation and administration numbers rose​​.

The Centre for Economics and Business Research (CEBR) has forecasted a significant increase in business insolvencies, predicting over 33,000 cases in 2024. This prediction comes after observing a faster-than-expected rise in insolvencies during the last quarter of 2023, suggesting that the economic conditions continue challenging businesses across the UK. Despite improved economic prospects, including lower inflation and slightly faster growth, many companies remain vulnerable, especially those heavily indebted to landlords and HMRC. The most at-risk sectors include construction, retail, and hospitality, which have nearly caught up with construction in terms of insolvency numbers, mainly due to the financial strains experienced during the COVID-19 years.​​

The situation underscores the lingering effects of the pandemic on businesses, particularly those that entered financial trouble during COVID-19 and have struggled to recover. The forecast and current trends highlight the importance of monitoring and assisting vulnerable sectors to mitigate the impact of economic challenges in 2024.

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