Corporate insolvencies in 2024 could surpass last year’s thirty-year high, new forecasts suggest, with around 33,000 firms on the brink.
According to new forecasts from the Centre for Economics and Business Research (CEBR), there could be more than 8,000 insolvencies per quarter in 2024.
Last September, the consultancy suggested that there would be 7,000 per quarter, but it raised its forecasts after new figures last week showed that there were nearly 6,800 insolvencies in the final quarter of last year.
This brought the total number of insolvencies in 2023 to 25,000, a thirty-year high. CEBR warned things will get worse before they get better for struggling businesses.
Although the Bank of England has stopped hiking interest rates and the UK’s economic prospects have improved, the think tank noted that “the relationship between the economy and companies in financial problems is lagged by about 18 months”.
This means recent improvements in the economic outlook are not that relevant.
The increase on its last round of forecasts in September largely reflects the tough outlook for the commercial property sector.
CEBR said the sector is in “tougher straits than we previously thought and is likely to push harder for rent recovery”.
Across 2023, construction companies were the worst hit, although both retail and hospitality came close to matching the number of insolvencies.
Douglas McWilliams, deputy chair at CEBR, also argued that the companies going bust were not ‘zombie companies’, companies that earn just enough money to continue operating and service debt, but are unable to pay off their debt.
“The companies going bust in 2024 and 2025 are largely ones that got into financial trouble in the Covid years and have never really escaped,” he said.