March 2024 insolvency statistics commentary – Light at the end of the tunnel but businesses must exercise caution

Lin Gartland, Restructuring & Insolvency (R&I) Director at Azets, the UK top 10 accountancy and advisory firm, comments on the latest company insolvency statistics for England and Wales:

“March insolvency figures typically show continued growth from the previous two months. However, unusually, March 2024 shows a 17% decline from February 2024. As a snapshot, this supports the assertion of several economic commentators who are suggesting that the recent upturn in UK corporate insolvencies has peaked.

“However, caution should be exercised with respect to concluding if this is the start of a trend. The prevailing economic environment remains challenging, with signs of respite being more medium term than short, and this continues to have a direct impact on businesses and their stakeholders.

“What is noticeable is that administrations, as a proportion of total insolvencies, continue to rise. During the first quarter of 2024, administrations accounted for 7% of insolvencies, the highest since Q1 2021. Administrations are a rescue tool, with the ultimate goal being to preserve value (and jobs) and to facilitate a restructure of the business. A continued increase points towards increased resilience in the economy; whilst UK corporates remain in a challenging environment, they are at least looking to the future with optimism – there is light at the end of the tunnel.

“That said, the stakeholder groups of the UK corporates are awakening to their options, and the relatively benign post-Covid environment is coming to an end. Whether its funders increasingly seeking to intervene to protect their position, HMRC being more proactive, or landlords seeking to exercise powers more frequently, the pressure is increasing.

“For management teams of businesses facing challenges it has never been more important to act early, seek advice and communicate honestly and openly with funders and other stakeholders – there are options, but as the pressure increases these options and the attractiveness dwindles.”