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Freshfields Transactions

| 3 minutes read

Does 2023 mark a turning point for UK corporate insolvencies?

2023 marked the highest annual number of corporate insolvencies since 1993, according to figures released by The Insolvency Service this week. While creditors’ voluntary liquidations remained by far the most commonly used process, 2023 saw increases across all processes tracked by the Insolvency Service. 

For restructuring and insolvency practitioners across the UK, understanding these trends is crucial for navigating the rapidly shifting economic terrain. In this blog, we have summarised the data and provided some thoughts on what comes next. 

Full year statistics for 2023

  • Total Insolvencies: There were 25,158 registered company insolvencies in 2023, including 20,577 creditors’ voluntary liquidations (CVLs), 2,827 compulsory liquidations, 1,567 administrations, 185 company voluntary arrangements (CVAs), and two receivership appointments.
  • Highest Since 1993: The number of overall insolvencies recorded reached a 30-year high.
  • Increase in CVLs: The number of companies entering into CVLs increased 9% from 2022, reaching the highest level since the data began in 1960.
  • Liquidation Rates: The rate of company insolvent liquidation was 53.7 per 10,000 active companies in 2023, the highest level since Q3 2014.

Q4 2023

In Q4 2023, there were 5,578 CVLs, 780 compulsory liquidations, 379 administrations, 50 CVAs, and one receivership appointment. The total number of recorded insolvencies in Q4 2023 were 14% higher than the same period in the previous year, being the highest quarterly total since Q4 2008.

Insights for practitioners

Dominance of CVLs

CVLs remain the dominant process representing 82% of all cases in 2023. Typically, smaller or less complex businesses that will be shuttered rather than continue trading through insolvency will utilise a CVL rather than administration. It is also worth remembering that companies will use a CVL (as opposed to a member’s voluntary liquidation) where the directors are unable or unwilling to swear a statutory declaration stating the company is able to pay its debts in full falling due in the next twelve months. 

While a CVL is of course a common exit route for an administration, the published figures are adjusted to remove CVLs following an administration to avoid double-counting.

Taken together, the record number of CVLs may indicate that businesses feeling the impact of the challenging economic environment and/or that stakeholders are less willing to support the businesses in these difficult circumstances.

Sectoral trends

All industry groups tracked saw and increase in insolvencies in 2023 compared to 2022. Sectors such as construction, hospitality, and retail were worst impacted, perhaps because these sectors are more susceptible to suffering from the immediate effects economic downturns. Given the ongoing impact of increased cost of living on discretionary spending, the challenges for hospitality and retail are perhaps unsurprising. Given the well-reported challenges facing the construction industry from higher interest rates and increased materials costs, it is perhaps also expected that construction tops the sector list for insolvencies (as it did in 2022).

Moratoria and Restructuring Plans 

The introduction of the restructuring plan and “CIGA” moratorium under the Corporate Insolvency and Governance Act 2020 expanded practitioners' toolkit to address distressed situations. The statistics show that 49 moratoria were obtained and registered with Companies House, alongside 22 restructuring plans since their introduction in June 2020 until the end of 2023. 

As we noted in our recent blog on the Adler restructuring plan Court of Appeal judgment, greater certainty has now been provided to companies proposing plans or those bringing challenges and those advising them in each case and the number of plans proposed and sanctioned since the Restructuring Plan was introduced shows that it is a well-established tool which companies avail themselves of.

2024 outlook

It is overall not a surprise that 2023 saw such an increase in corporate insolvencies and that affected businesses are feeling the combined impact of the continuing squeeze following the loss of COVID-19 support measures and a tightening of consumer spend. 

The increased level of insolvency is perhaps one the first signs that the expected wave of insolvencies is slowly approaching the shore, and perhaps reflects stakeholders’ unwillingness to keep supporting businesses with such a challenging macro-economic backdrop. It remains to be seen whether the wave will break suddenly or whether we will see a gentler swell.

Looking ahead, the outlook for 2024 remains challenging, with various geo-political events looming which may affect supply chain and could further impact inflation. The UK economy continues to face various macro-economic headwinds, such as the ongoing high interest environment and the corresponding high cost of finance.  Added to that is the ongoing uncertainty over trade relations with the EU and other countries and perhaps more unravelling of certain businesses which were kept alive through Covid-19 support measures but are now left to fend for themselves in a difficult economic environment. These factors are likely to put more pressure on the cash flow and liquidity of many businesses and lead to a turbulent 2024.

The increased level of insolvency is perhaps one the first signs that the expected wave of insolvencies is slowly approaching the shore, and perhaps reflects stakeholders’ unwillingness to keep supporting businesses with such challenging macro-economic backdrop.


restructuring and insolvency