Press release

28 Apr 2023 London, GB

EY comments on company insolvency statistics for Q1 2023

UK Turnaround and Restructuring Strategy Partner at EY-Parthenon and President of the Insolvency Practitioners Association (IPA)

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Related topics Strategy and Transactions Restructuring and Turnaround Strategy by EY-Parthenon

Samantha Keen, UK Turnaround and Restructuring Strategy Partner at EY-Parthenon and President of the Insolvency Practitioners Association (IPA) comments:

“The significant year-on-year rise in corporate insolvencies has again been driven by Creditors’ Voluntary Liquidations (CVLs), with business owners calling time on their companies rather than looking at rescue options. CVLs accounted for 82% of all insolvencies in Q1, a 12% increase from the same period in 2022.

“As well as contending with inflation, falling business confidence and supply chain issues, many companies are now also dealing with increased working capital demands and a challenging credit environment which is intensifying liquidity issues.

“EY-Parthenon’s latest Profit Warnings report found that warnings from UK-listed companies in Q1 2023 reached their highest first quarter total since the start of the pandemic. Thirty-five per cent of these warnings cited delayed or cancelled contracts, up from 21% for the same period last year, as prolonged stresses have a direct impact on business profitability.

“As a result, we are seeing insolvency and restructuring activity rising - our data shows that of the 31 companies that have entered the ‘three-warning danger zone’ since the start of 2022, 29% have since gone into administration, been sold, or are in a sale process.

“However, there are some reasons to be positive. The latest analysis from the EY ITEM Club Spring Forecast has found that the UK economy is slowly turning a corner and should avoid recession this year. Many businesses are facing a prolonged recovery so it’s important that management teams recognise the signs of stress early and build solid operational resilience to optimise growth opportunities and withstand further economic surprises.”