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Insolvencies drop 15 per cent – but experts warn ‘we’re not out of the woods yet’

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Corporate insolvencies dropped off in April as business confidence seemed to improve but experts warned that the drop may not signal better times ahead.

According to new figures from the Insolvency Service, 1,685 companies went insolvent in April 2023, a 15 per cent fall on the same month the previous year. This was also down from the 2,457 insolvencies in March.

The drop off in insolvencies was driven by a fall in creditors’ voluntary liquidations (CVLs), by far the most common type of insolvency. CVLs were 23 per cent lower than last year.

PwC’s Carla Matthews said that “on the surface” these figures look “encouraging”, reflecting increased business confidence and a more optimistic view of the economic outlook. But Matthews warned that “we’re not out of the woods yet”.

“The trading environment remains challenging for business, and while energy costs are starting to drop, both inflation and the cost of servicing debt remains stubbornly high… the outlook for the rest of the year may still be turbulent,” she said.

David Kelly, also at PwC, said the pain was being felt most by smaller businesses. “Our analysis shows approximately 99 per cent of liquidations in the first quarter of this year have related to companies with annual turnover of less than £1m,” he said.

Individuals also saw lower rates of insolvency. There were 531 bankruptcies in April, five per cent lower than last year and less than half pre-2020 levels.

On average, 6,336 individual voluntary arrangements were registered each month in the three months to April, 16 per cent lower than the same period last year.

Despite the figures, president of R3 Nicky Fisher said the figures must be treated with “some caution,” arguing they reflect “a changing debt solutions market where options for individuals might not be as readily available as they might be”.

She suggested that there could be a “backlog of cases building up as a result.”

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