Tom Russell – R3 president

Corporate insolvencies fell to 1,866 in November, representing an 8% decrease from October and a 7% drop compared to the same time last year. Notably, this figure is 18% lower than in November 2023.

Tom Russell, president of R3, said: “When considered alongside a drop in the inflation rate to 3.2% and the recent cut in the interest rate to 3.75% it may give a glimmer of hope to struggling businesses in the run up to Christmas and offer business owners some cautious optimism that conditions may begin to improve next year.

“That said, company insolvency levels remain stubbornly high compared to five years ago, reflecting difficult trading conditions. In addition, the unemployment rate has reached a near six-year high of 5.1% as employers have been delaying recruitment and investment decisions. Sustained progress on inflation and employment will be key to restoring confidence in the long term.”

He continued: “For hospitality businesses especially, the next few weeks could make or break their business.

“Many face a sharp drop-off in trade after festivities end with January bringing cashflow pressures caused by the rent quarter and potentially larger supplier, VAT and payroll tax payments reflecting a busy December. Our members typically see an increase in enquiries and distress calls from this sector early in the New Year.

“Retailers also face post-Christmas challenges, including high levels of returned goods at a time when wages and other costs still have to be met.”

Turning to personal insolvencies, Mr Russell, who is also a licensed insolvency practitioner and director at James Cowper Kreston, added: “Personal insolvency rates have also declined by 12% although debt relief orders remain at historically high levels. However, the Insolvency Service notes that there is a backlog of cases caused by a change in its case management system so we will need to wait to see the true picture. 

“It’s common for people to increasingly rely on consumer credit during the festive season and this can place households under strain. It is often not until the spring that people fully realise whether their spending was affordable which may result in rises in personal insolvencies next year. While falling mortgage rates may eventually support household spending, many consumers will be locked into fixed deals and will have less disposable income, which in turn affects businesses.

“R3 members remain committed to supporting businesses and individuals through these challenges and to advocating for practical solutions that help ensure long term economic resilience.”