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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 bankruptcies eased in April as business confidence appeared to be improving, but experts cautioned the decline may not signal better times ahead.

According to new figures from the Bankruptcy Department, 1,685 companies went bankrupt in April 2023, down 15 percent from the same month a year earlier. This is also down from 2,457 bankruptcies in March.

The decrease in insolvencies was driven by a decrease in voluntary liquidation by creditors, which are by far the most common type of insolvency. CVLs were 23 percent lower than last year.

“On the face of it,” said Carla Matthews of PricewaterhouseCoopers, “encouraging,” reflecting increased business confidence and a more optimistic outlook on the economic outlook. But Matthews warned, “We’re not out of the woods yet.”

“The commercial environment remains challenging for business, and while energy costs have begun to decline, both inflation and the cost of debt servicing remain stubbornly high…the outlook for the rest of the year may remain turbulent,” she said.

Small businesses have been feeling the most pain, said David Kelly, who also works for PwC. “Our analysis shows that nearly 99 per cent of divestitures in the first quarter of this year were related to companies with an annual turnover of less than £1 million,” he said.

Individuals also experienced lower insolvency rates. There were 531 bankruptcies in April, 5 percent less than last year and less than half of pre-2020 levels.

On average, 6,336 individual voluntary arrangements were recorded each month in the three months through April, 16 percent fewer than in the same period last year.

Despite the numbers, R3 chairman Nicky Fisher said the numbers should be treated with “some caution”, arguing that they reflect “a changing debt solutions market where options for individuals may not be as readily available as they might be”.

She noted that there could be a “backlog of issues as a result”.

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