There were 2,163 registered company insolvencies in June 2023, according to the latest figures from the Insolvency Service. While this was fewer than the 2,552 recorded in May, it shows a 27% rise year on year, with 1,688 registered in June 2022.
Figures from June 2023 included 260 compulsory liquidations - 77% higher than in June 2022 – and 1,759 Creditors’ Voluntary Liquidations (CVLs), which was 21% higher than last June. The number of administrations and Company Voluntary Arrangements (CVAs) was also higher than in June 2022.
The factors causing the rise in company insolvencies are well-documented. During the Covid-19 pandemic businesses took on extra debt to survive, particularly during periods of lockdown, and many are still struggling to get back to pre-Covid trading levels.
Many businesses, particularly in the hospitality sector, have been unable to increase trade and profitability because of the lack of staff from the EU available to work in the UK, and the war in Ukraine has caused a huge increase in energy costs for businesses. Despite the Government offering some assistance with these bills, there is no doubt that company profits have been adversely affected.
Meanwhile, increased inflation and, as a result, increased interest rates are reducing company profitability.
While all of the above are factors beyond your control, there is one factor that you can influence, and that is better management.
What actions can you take to help avoid business insolvency?
Know your figures
Without up-to-date accounting records, it’s impossible to create accurate cash flow forecasts, and you’re unable to analyse your past business performance or make sound decisions on how to fine-tune your day-to-day operations for the better.
A great starting point would be to invest in a cloud-based accounting system. With the right links to your bank, the time required to enter your transactions is greatly reduced. You can provide your accountant with access and they can assist in producing meaningful management accounts and can act as a sounding board for discussing future strategies.
Larger businesses with large numbers of transactions could benefit by using an accounting outsourcing facility. This will cost money but can be beneficial if it means that all your VAT and PAYE returns are up to date, and you can see exactly how your business is progressing.
Use services on offer
Have you thought of joining your local Chamber of Trade? They offer a range of business services which are exclusively available to members. These services help members thrive by demonstrating cost savings, offering unique benefits and helping to drive business growth.
Similarly, your Local Enterprise Partnership (LEP) can also help. LEPs undertake activities to drive economic growth and job creation, improve infrastructure and raise workforce. LEP Growth Hubs support businesses facing the cost-of-living challenges and are a useful resource if you are looking for business funding, support or guidance.
Don’t be afraid to look at alternatives
If your business is struggling and you are not sure how to get things back on track, consider having a chat with an Insolvency Practitioner. This doesn’t have to be the end. They have tools that can allow your business a breathing space to restructure or refinance. This can mean that you can continue to trade in a more viable way, thereby saving jobs and maintaining relationships with your customers and creditors.
For more information and support please call 0808 1445575 or email help@armstrongwatson.co.uk.
