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Freshfields Transactions

| 1 minute read

Insolvencies remain high - but the restructuring plan is starting to take off

The UK’s latest quarterly insolvency statistics have been published and, as predicted, continue to show a high rate of insolvencies, both in relation to pre-pandemic numbers and by comparison to last year’s Q1 results. The Q1 2023 statistics show a 18% increase in the overall number of registered company insolvencies from Q1 2022 and a 4% decrease from Q4 2022, with a total of 5,747 company insolvencies (seasonally adjusted) during this past quarter.

While there was a slight quarterly decrease (with administrations down 12% and compulsory liquidations down 11% on the previous quarter) overall, quarterly insolvencies remain close to the highest level recorded since 2009.

On a macro level, with the ongoing economic impact of stubbornly high levels of inflation, the rolling off of covid schemes and decrease in energy support levels, and cost of living pressures on consumer spending, it has been a continuously challenging environment for many businesses and rising quarterly insolvency figures have come to be expected. Increased financing costs as a result of rising interest rates and sustained higher input costs have meant further pressure on business cash flows, leading the less stable to the point of failure.

The statistics show that industries suffering the most insolvencies over the past 12 months include construction, wholesale and retail trade, and accommodation and food service activities. This is perhaps unsurprising given these are all industries which will be impacted significantly by supply side pressure and high energy costs. As cost of living pressures on consumers continue to bite, we can expect to see retail and casual dining continue to struggle. Economic pressures are, however, not limited to certain industries – all large industries saw increased insolvencies in the four quarters ending Q1 2023.

As pressures turn to distress, companies may move straight to insolvency or reach for a restructuring solution. The statistics report that since their introduction in the Corporate Insolvency and Governance Act 2020, 42 companies have obtained a moratorium and 20 restructuring plans have been registered. While both of these tools are gradually becoming part of the UK’s restructuring toolkit, the plan in particular has shown growing adoption, initially just with larger businesses but now increasingly in the SME space.

As pressures turn to distress, companies may move straight to insolvency or reach for a restructuring solution


restructuring and insolvency