News
Now that the Insolvency Service has released the corporate insolvency figures for January 2024, it looks like
we are still on an upward trajectory after the all-time record high numbers for 2023. We ask Nick Hood, Senior
Business Adviser at the Opus Business Advisory Group (www.opusllp.com ) what lies behind these depressing
statistics.
“The December GDP figures finally confirmed that the UK was in recession for the second half of 2023 as growth bounced around anaemically in a narrow range around the zero-base line. We’re a long way below the 30-year trend of average annual growth of 2.1%. No wonder business confidence is low and business investment continues to lag far behind all our competitors among developed economies.”
“The rolling 12-month total to January 2024 for company failures has climbed to 26,687 after the figures for January alone showed a 5% rise on the same month in 2023. Creditor’s Voluntary Liquidations (CVLs) remain just about the only game in town for struggling businesses, accounting for 80% of insolvencies.”
“This reflects just how tough it has been for those running businesses since the start of the pandemic, then through the disruption from the Ukraine war, and into the cost of living and inflation crisis. It’s hardly surprising that entrepreneurs are still throwing in the commercial towel in large numbers, recognizing that their businesses are too severely wounded for any positive rescue or to be of any serious interest to potential buyers.”
“Many of the adverse factors which contributed to record failures in 2023 are still out there, threatening both profitability and viability. The battle to restore profit margins is far from won, the tight labour market continues to impinge on both operational efficiency and labour costs, while hopes of early and meaningful cuts to high interest rates have been dashed by the stalled fall in inflation.”
“One small ray of sunshine in the January insolvency numbers was a rise at last in the number of business rescues through the Administration route, up 40% on January 2023. This is welcome, but we still have a long way to go to recover to pre-pandemic levels. Despite this surge, Administration numbers in January 2024 were 29% lower than in January 2020 and represent 6% of failures compared to 10% four years ago.”
“A respected business leader commented this week that they expected UK businesses to raise their prices by a minimum of 6% in 2024, which could be a major headache for those predicting that inflation will drop back to the Bank of England’s target of 2% later this year. If high inflation and elevated interest rates become embedded in the UK economy, we could be in for an even uglier year for business failures.”