The UK Insolvency Service has released the July 2024 company insolvency statistics, highlighting key trends across England, Wales, Scotland, and Northern Ireland. The report offers a critical snapshot of the financial health of UK businesses, with particular focus on the number of insolvencies, types of insolvency procedures, and economic pressures affecting businesses.
In July 2024, there were 2,191 registered company insolvencies, which is a decrease of 7% from June 2024 but a 16% increase compared to July 2023. The rise in insolvency rates year-on-year is largely due to the persistent challenges businesses face in the current economic climate, such as high inflation, rising interest rates, and sluggish consumer demand. This analysis will break down the data, offer insights into the types of insolvency procedures used, and assess regional and sector-specific trends affecting UK businesses.
Understanding the insolvency trends is critical for business owners, financial professionals, and policymakers, as these trends offer early warning signs of financial distress in the economy. This report aims to highlight the main factors driving these statistics, providing readers with a deeper understanding of the UK’s insolvency landscape.
Key Insolvency Trends in July 2024
The July 2024 company insolvency data reveals several important patterns:
Total Registered Company Insolvencies: A total of 2,191 insolvencies were recorded in July 2024, down by 7% from June but up 16% year-on-year. This suggests that while there was a slight monthly dip, overall insolvency rates are rising compared to last year, reflecting sustained pressure on UK businesses.
Creditors’ Voluntary Liquidations (CVLs)
CVLs continue to be the most prevalent form of insolvency, accounting for 1,691 cases, representing 77% of all insolvencies. This indicates that a majority of businesses are voluntarily winding down due to financial distress.
Compulsory Liquidations
The number of compulsory liquidations rose to 320, which is the highest level since the height of the COVID-19 pandemic. Compulsory liquidations occur when creditors force companies into liquidation, suggesting that more businesses are unable to meet their debt obligations.
Administrations
There were 155 administrations, a process used to restructure businesses to avoid liquidation. This figure indicates that some companies are attempting to survive through reorganisation.
Company Voluntary Arrangements (CVAs)
There were 25 CVAs recorded, allowing businesses to negotiate terms with creditors to pay back their debts over time while avoiding liquidation.
Sector and Regional Breakdown
While the July 2024 insolvency statistics do not offer a detailed sector-by-sector breakdown, industries that are heavily reliant on consumer spending, such as retail, hospitality, and manufacturing, are expected to be overrepresented in the figures. These industries continue to face major headwinds from rising costs, weakened consumer demand, and supply chain disruptions.
In terms of regional variation, areas with higher concentrations of SMEs and those reliant on the aforementioned vulnerable sectors are likely experiencing higher insolvency rates. For example, regions such as Northern England and parts of Scotland, where retail and hospitality are key economic drivers, are expected to see an increase in company insolvencies. Additionally, regions heavily reliant on manufacturing may also be seeing elevated insolvency levels due to rising input costs and weak demand.
Year-on-Year Comparison and Historical Context
Comparing July 2024 to the previous year reveals a 16% increase in the number of registered company insolvencies. This rise is consistent with the broader trend observed since the end of the government’s pandemic support schemes. The withdrawal of measures such as the furlough scheme and government-backed loans has exposed many businesses to financial instability.
Despite the rise in insolvencies compared to last year, the current figures remain below the peaks seen during the 2008-09 financial crisis, when insolvencies reached a high of 113.1 per 10,000 companies. In contrast, the figures for July 2024 show approximately 56.6 insolvencies per 10,000 companies, or one in every 177 businesses. However, the upward trajectory since 2023 signals that economic pressures are intensifying.
Insolvency Procedure Breakdown
Creditors’ Voluntary Liquidations (CVLs)
CVLs dominate the July 2024 insolvency landscape, accounting for 77% of total cases. This suggests that many companies, particularly SMEs, are choosing to voluntarily wind down operations before creditors take legal action. The high number of CVLs highlights the growing number of businesses that have become insolvent due to unsustainable debt burdens, rising costs, and subdued demand.
Compulsory Liquidation
The significant rise in compulsory liquidations to 320 cases in July 2024 signals increased creditor enforcement. Compulsory liquidations occur when creditors, frustrated by unpaid debts, seek court orders to force a company into liquidation. This rise reflects the growing number of businesses unable to manage their debt repayments.
Administration
The 155 administrations recorded in July reflect attempts by some companies to restructure or seek rescue options. Administration is often viewed as a tool to protect viable businesses by allowing them to continue trading while restructuring debt. This trend suggests that while many businesses are in distress, some are still trying to find a path forward.
Company Voluntary Arrangements (CVAs)
CVAs accounted for 25 cases in July 2024, offering a smaller but significant route for businesses to avoid liquidation. CVAs allow businesses to reach agreements with creditors to repay their debts over time, making it a popular option for larger companies seeking to avoid more drastic insolvency measures.
Economic Factors Driving Insolvency Rates
Several economic factors have contributed to the rise in insolvency rates in 2024:
Inflation
The persistent rise in inflation has increased operating costs across all sectors, from raw materials to energy prices. These rising costs are squeezing profit margins and making it difficult for businesses to remain viable.
Interest Rates
The Bank of England’s successive interest rate hikes have made borrowing more expensive, putting additional pressure on businesses that rely on debt financing. Rising interest rates have also affected consumer spending, further reducing demand for businesses in key sectors like retail and hospitality.
End of Government Support Schemes
The end of government support measures has left many businesses, particularly SMEs, without the financial safety nets that kept them afloat during the pandemic. Without access to grants or furlough schemes, many companies are now facing insolvency.
Outlook and Future Considerations
Looking ahead, the UK’s insolvency rates are likely to remain elevated as long as inflation and interest rates continue to weigh on business performance. Sectors such as retail, hospitality, and construction will be particularly vulnerable, as they are more exposed to fluctuations in consumer spending and input costs.
Businesses facing financial difficulties should take proactive steps to manage cash flow, reduce costs, and seek professional insolvency advice early. Directors must be aware of the signs of financial distress and explore restructuring options or enter administration before creditors initiate compulsory liquidation.
The July 2024 UK company insolvency statistics indicate a troubling rise in business insolvencies, particularly among SMEs. Rising costs, weakened consumer demand, and increasing debt burdens are pushing many businesses into insolvency. For business owners, understanding the types of insolvency procedures available and taking action early can make a critical difference in avoiding compulsory liquidation.
For more information on how to navigate UK insolvency laws and available support, visit our insolvency support page for resources and advice on protecting your business.
