Eleanor Temple, chair of the UK’s insolvency and restructuring trade body R3 in Yorkshire and a barrister at Kings Chambers in Leeds, responds to the publication of the June 2023 personal and corporate insolvency statistics for England and Wales:
“The monthly fall in corporate insolvencies is driven by a reduction in Creditors’ Voluntary Liquidations, but numbers for this process are still higher than they were pre-pandemic as a sizeable number of directors are still choosing to close their businesses while the choice is still theirs to make.
“Despite the monthly fall in corporate insolvencies, levels are higher than they were this time last year – and well above what they were this time two, three and four years ago, as the hangover from the pandemic combines with a challenging trading climate caused by a number of economic issues.
“Firms are trading in a time of cautious consumer spending and rising costs, which are hitting margins and profits hard. Directors expect costs and wages to rise further as the year goes on, and if these don’t translate into more demands for goods and services, it could be the final blow for those businesses that are just managing to survive.
“Rising interest rates are another potential challenge, as that will make the cost of borrowing more expensive and may price some firms out of the survival funding they’ll need.
“Given the economic and business climate, we urge directors to be alert to the signs of financial distress, and seek advice if they find themselves facing issues like rising stock levels, problems with cashflow or difficulties paying staff, taxes or suppliers.
“Turning to personal insolvencies, the monthly fall is driven by a reduction in all types of personal insolvency process, but the financial picture is still a difficult one for many in England and Wales.
“People are worried about the economy and reluctant to spend on anything more than the essentials. The cost of living and concerns about job security are front of mind for many, and with wages failing to keep pace with inflation households are tightening their purse-strings.
“Personal debt and credit card debt have both increased, and credit cards are increasingly being used to pay for basics like food shopping. It’s understandable why people would do this, but it isn’t a sustainable or sensible move, so I suggest anyone in this position looks at their outgoings and sees where they could make changes – especially as rising interest rates are going to increase the costs of borrowing.
“It is really hard to talk about your concerns with money, but I would encourage anyone with financial concerns – whether they’re personal or business ones – to be brave and seek advice as soon as possible.
“There are a number of options out there for resolving personal or corporate financial issues, but these options dwindle the more time elapses before the problem is addressed, and seeking advice when your worries are new – or at least fresh – nearly always results in a better outcome than if you’d waited until the problem became more severe.”