EY comments on Insolvency Service Q4 2023 company insolvency data

Simon Edel, UK Turnaround and Restructuring Strategy Partner at EY-Parthenon: “Company insolvencies in 2023 reached their highest annual total in 30 years reflecting the difficult business environment that companies have faced over the last 12 months. The final quarter of 2023 also saw the highest quarterly number of Creditors Voluntary Liquidations (CVLs) since this data started to be recorded in 1960.

“Whilst the uptick in insolvencies has been largely driven by smaller businesses and CVLs, we are now starting to see stress spread to some mid-market and larger companies, many of which are facing refinancing hurdles as well as ongoing inflationary challenges. 

“According to EY-Parthenon’s latest Profit Warnings report, one-third of profit warnings from UK-listed businesses in Q4 2023 were from companies with annual revenues of over £1 billion. This is more than double the average number of warnings given by businesses of this size.

“We’re also seeing the return of the ‘three-warning rule’ with the number of companies issuing at least three profit warnings in a 12-month period rising to 39 companies in 2023, compared with 31 companies in 2022 and 23 in 2021. Of these companies we’d normally expect 20% to delist within a year of their third warning – 10% due to insolvency. 

“Despite recent, more positive economic data, there is a growing divergence between companies capable of riding the wave of the recovery and those too entangled in financial or operational issues to benefit. Businesses that are unable to demonstrate a robust trading performance or reliable forecasts are likely to face difficulties when refinancing under favourable terms. Where possible, it’s critical that companies look for opportunities to improve their liquidity to reduce debt requirements.”