Tag Archives: Economy

Accountancy & Accounts, Finance and Banking

ACCA urges businesses to weigh up sustainability implications for AI investment

 

  • Accountants need to ensure long term sustainability objectives are not sacrificed for short term AI gains.
  • Leading global accountancy body ACCA says to embrace AI effectively requires education and a cultural mind shift.

 

Accountants have a key role in driving organisations towards using AI (artificial intelligence) to hit sustainability goals, especially in the area of data quality and data governance.

 

At the same time, they must make organisations aware of the environmental impact of AI investment in terms of greater emissions and water usage.

 

Leading global accountancy body ACCA has released the latest in its AI Monitor series, Unravelling AI’s role in sustainability, which says that to embrace AI effectively requires education and a cultural mind shift.

 

Embracing this sophisticated, emerging set of technologies could help in the fight to meet present needs without compromising future generations’ ability to meet their needs. AI solutions are increasingly seen as critical in helping organisations measure and report their environmental impact.

 

Alistair Brisbourne, head of technology research at ACCA, warns AI is a double-edged sword. He said: “It is clear AI holds tremendous potential, but without due consideration AI technologies can also threaten progress towards achieving sustainability goals.”

 

This is where accountants can add vital strategic value. As ACCA’s research Chief Value Officer – the important evolution of the CFO pointed out, as organisations increasingly integrate analysis and AI into their processes, it is the human analysis and validation of the outputs that create the insights which stimulate value generation.

 

Brisbourne said: “Organisations need to focus on getting people to think about AI as something that is learning from them, encouraging people to input and maintain data that will provide more value. At the heart of these challenges lies the fundamental issue of data quality and standardisation. Accountants need to lead in the establishment of good data practices to ensure benefits are realised.”

 

AI could be used to accelerate progress on achieving UN Sustainable Development Goals (SDGs). Innovative solutions are needed with only 17% of SDG targets on track for 2030 and another 35% showing signs of stagnation or regression.

 

In particular, technology could play a supporting role in sustainability reporting with AI overcoming one key challenge – converting financial data into meaningful environmental metrics. However, the challenge of data quality is not solved purely using AI.

 

Brisbourne added: “In terms of sustainability reporting, accountants have a critical role in making sense of transaction data to underpin and improve reporting.

 

“They need to ensure high-quality data input that AI systems can effectively interpret and learn over time, dealing with exceptions and verifying data. From an assurance angle, they can also support improved validation of estimates and monitoring of models running such exercises.”

 

The report also examines how AI brings its own sustainability challenges.

 

A single ChatGPT request has been estimated by the Electric Power Research Institute to require approximately ten times the amount of energy as a Google query. Goldman Sachs estimates that currently relatively stable data centre power usage is set to surge 160% by 2030 fuelled by AI. As a result, modern data centres are also increasing water usage – extensive cooling systems are required as more powerful chips generate more heat.

 

Brisbourne notes that organisations should focus on assessing the environmental impact of AI; ensure ethical deployment; and work on initiatives most relevant to stakeholders and business objectives.

 

Visit ACCA’s website for more information.

Accountancy & Accounts, Business, Economy & Jobs News, FInance, Finance and Banking, Finance News

Tax rises and complicated tweaks piles pressure on businesses

  • Multiple small tax changes announced at the Autumn Budget will create complexity for accountants and businesses
  • Small businesses will be feeling the pressure of new tax changes announced

 

ACCA, the leading global accountancy body, noted that while a commitment for greater stability in public finances is welcomed, including the alignment of economic strategy, a corporate tax roadmap and spending plans, it remains to be seen whether the announcements provide a much-needed boost to business confidence.

 

The changes announced continued the pattern of opaque changes to taxes, such as shifts to thresholds, to boost tax take in the short term, while avoiding long-overdue reform of our tax system, which will be necessary to create a long-term approach to investment and innovation.

 

Lloyd Powell, head of ACCA Cymru/Wales, said: “The focus on investment, economic stability, boosting growth and supporting public services are welcomed – with £1.7bn of additional funding for Wales though the Barnett Formula, the announcement on support for coal tips and a green hydrogen project in Bridgend.

 

“However, although partially offset by changes to allowances, the impact of the £40bn of increased taxes announced – including on Employer National Insurance contributions and thresholds and Capital Gains Tax – will be felt by many businesses across Wales. Business confidence, critical to encourage investment and stimulate growth, has been in short supply in recent months. Following these announcements, it’ll be more important than ever for these businesses to seek the advice of their accountants; to ensure they comply with changes, as well as refocusing business growth plans.

 

“Workers across Wales will welcome the decision not to increase Fuel Duty and to unfreeze Income Tax and NI thresholds from 2028/29.

 

“With a wide range of tax changes announced, the Chancellor should have gone further on simplifying the tax system, with the changes announced arguably adding to existing complexity.”

 

Glenn Collins, head of technical and strategic engagement, ACCA UK, added: “The UK tax landscape is already too complex, and yesterday’s announcements do little to address this. At a time when we need to see a longer-term approach to our tax system to support investment, we have seen more short-term adjustments to raise revenue, adding yet more complication. ACCA has repeatedly called for the government to commit to a programme of tax simplification and it was disappointing not to hear more about that from the Chancellor.

“Expectations were high ahead of the Budget. Ultimately it has left some questions unanswered, perhaps until the next phase of the spending review in spring 2025. Whether this will provide the clarity and certainty business needs remains to be seen.”

Business, Economy & Jobs News

Chambers Wales South East, South West and Mid comment on Autumn Budget

Gus Williams, interim CEO at Chambers Wales South East, South West and Mid, said:

“This was always going to be a difficult budget. The headlines are going to be the £40bn increase in taxes which was inevitable given pressures caused by demographics – an ageing population – increasing numbers of people not participating in the workforce, and the need for long term public investment.

“The approach has been to try and spread the additional tax burden as widely as possible without touching income tax or VAT, focusing on those taxes that provide most certainty that the rises will increase the tax take in the short term. This means changes to Employers NI, inheritance tax, agricultural and business disposal relief, Capital Gains Tax, second home stamp duty, abolition of the non-dom regime, air passenger duty, tax on vapes, VAT on private schools.

“Changes to Employer NI, just increasing the rate to 15% and reducing the threshold from £9,000 to £5,000 rather than including pension contributions means a slightly lower rise in Employers NI than had been flagged, and makes sense as it retains the pension contribution incentive. But it will be a burden to businesses, particularly in some sectors where wages are at the lower end and where staffing costs are a high proportion of overall costs.

“The increase in the National Minimum Wage and increases to Employers NI will undoubtedly squeeze small business margins, and small business will want to see evidence of government investment, and other initiatives that grow the economy and increase opportunities to counter this squeeze on margins – or the cost pressure on small business could have consequences on hiring and investment.

 

“Some will be upset about the increases in Capital Gains, but it is worth noting that the rises in CGT broadly take us back to where they used to be, there are various exemptions and rules which we will need to look into before providing a full assessment.

“Freezes on small business rates and reductions for the hospitality and leisure sectors are something the Chambers of Commerce lobbied hard for, and are welcome.  The infrastructure investment plans appear sensible, well thought out and achievable rather than just aspirational.  The reduction in draft alcohol duty is welcome news for pubs.

“Changes to inheritance tax for agricultural and business property will impact succession and tax planning for a number of small business owners, and it is important that all small business owners make sure they have a succession or exit plan in place.

“The slight of hand in all this is that a lot was made of personal allowances increasing in 2028 – it’s currently 2024.  The ongoing freeze in personal allowances until 2028 combined with the national minimum wage increases will push more tax revenues into the Treasury, and this is probably where a significant chunk of the additional tax take will over the course of this parliament will actually come from.

“The real test will be whether the government can deliver efficiently on its investment plans, makes the right decisions on capital spending, can deliver genuine reform to the planning system, and can tackle the impact of those not working and particularly not working due to long term sickness.”

Accountancy & Accounts, Economy & Jobs News, FInance, Finance and Banking

Budget 2024; Did Halloween come early? Hear the reaction from the Hazlewoods Cardiff Tax team

Tax partner Nick Haines and his team have been analysing yesterday’s announcements from Westminster. Nick states: “In the first Labour Budget for 14 years, there was much trepidation as to the level of tax increases, despite the manifesto pledge not to increase national insurance, income tax, VAT and corporation tax. As it turned out, the Chancellor, Rachel Reeves, announced measures to raise an additional £40 billion in tax per year, by the end of the five-year forecast period, which is a frightening figure, in keeping with the time of year.

 

“Due to the manifesto pledge, the Government was limited in the areas it could attack, but where they could, they most definitely did.

 

“Capital gains tax, which was always going to increase, went from the current 10% rate for basic rate taxpayers and 20% for higher and additional rate taxpayers, to 18% and 24% respectively, matching the current rates on residential property gains, which remained unaltered.

 

“There were also fears over the abolition of business asset disposal relief, although it survived at £1 million of lifetime gains, but with the rate increasing from its current 10%, to 14% from April 2025 and 18% in April 2026. The maximum benefit, therefore, from 2026 will be £60,000, as opposed to the current £100,000.

 

“Individuals who receive carried interest (mainly private equity investors), saw the rate increased from 28% to 32% from 6 April 2025, but with the intention of aligning it to income tax rates from 6 April 2026.

 

“It is well understood that capital gains tax is a ‘voluntary’ tax; if you don’t sell, you don’t pay, so it will be interesting to see if the increase in rates cause a behavioural change, with individuals holding out for a hopeful reduction at some point in the future, which would then cause a reduction to the receipts for the Exchequer.

 

“The biggest revenue raiser was the increase in employers’ national insurance, from 13.8% to 15% from 6 April 2025 and reducing the threshold at which employers pay it, from £9,100 to £5,000. Smaller businesses were given some relief by an increase in the employment allowance from £5,000 to £10,500, removing those with, potentially, up to four employees, from incurring a liability. This measure will generate an additional £20 billion per year by the end of the five-year forecast period.

 

“Whilst not a direct tax on ‘working people’, the consequence of such a measure is likely to be an impact on future salary increases, so ultimately it may well be a tax on those people Labour vowed to protect.

 

“Inheritance tax was also attacked, with business property relief and agricultural property relief limited to 100% of £1 million, with the remainder only qualifying for relief at 50%, whilst investment in AIM listed shares and other alternative markets will only be eligible for 50% relief.

 

“Whether this measure impacts the ability for family companies and farms to be passed on through the generations, without placing an undue financial pressure on the family or businesses in question, remains to be seen. Given this measure only raises £500 million, it is hardly a significant revenue raiser, but could severely hurt an important part of the UK economy.

 

“Pensions, which have been exempt from inheritance tax since April 2015, are to be brought back into the tax net from April 2027. This was the only announcement affecting pensions, whereas prior to the Budget, there was nervousness about the 25% tax free lump sum and tax relief on pension contributions, along with national insurance on employer pension contributions, so perhaps it should be considered we got off lightly.

 

“Stamp duty land tax did not escape either, with the surcharge for additional dwellings increasing from 3% to 5% in England and Northern Ireland. It will be interesting to see whether Wales will follow suit, with the additional rate for land transaction tax already at 4%.

 

“VAT on school fees from January 2025 was confirmed, as was the abolition of the non-domicile tax regime from April 2025. The concern with these measures will be the potential “for private schools to reclaim significant amounts of VAT for expenditure incurred before registration, along with the potential emigration of those impacted by the non-domicile changes. Given the policy costings indicate a peak for the non-domicile abolition of £5.9 billion in 2027/28, which then drops to £85 million by the end of the five year forecast, it would appear as though the Government is well aware of this risk.

 

Corporation tax is ‘as you were’ with the maximum 25% rate confirmed until the end of parliament, whilst the annual investment allowance and full expensing regime will both be maintained.”

 

So with revenue raised, where is it all going?

 

Bruce Black, Hazlewoods Tax Director advises “Well, firstly, the Chancellor had to plug the £22 billion black hole, which the above has certainly done, and then some. The next job was to ‘invest, invest, invest’.

 

Housing, schools, the NHS, transport, social care, local authorities; you name it, they’re investing. Furthermore, the Welsh Government will receive an additional £1.7 billion of funding as well as £25 million to keep disused coal tips safe. The Government also committed to funding for 11 new green hydrogen plants, one of which will be located in Bridgend. Some of this funding will come from the surplus generated by the tax raising measures, others through the introduction of their new ‘investment rule’ allowing them to borrow by recognising the value of the investment, as well as the cost, giving a net financial debt figure.  It wasn’t all about the spend, cost efficiency targets were to be set across the public sector to generate more to go into the pot.”

 

Nina Turner, Hazlewoods Associate Tax Director goes on to say “There is no doubt that the UK’s public services are in dire need of a boost and if the allocation of monies are spent wisely, and services are improved as a result, most will accept the tax rises as being a necessary evil.

 

For too long, however, tax rises have not resulted in improved public services.  UK taxpayers are already suffering the highest tax burden for 80 years and this is only set to increase.  Individuals and businesses are tired of not getting value for money, so whilst the Government are saying it is not a quick fix, the overwhelming desire for improvement will no doubt mean the UK public will not have an endless supply of patience before they will want to see some results.

 

Can Labour deliver, or will the increased tax cost actually result in a negative impact on the UK’s growth?  We will all be hoping they can but will continue to fear the worst.”

Business, Business Finance, FInance, Finance and Banking

UK drops out of Global Pension Index top 10

The UK has dropped out of the top 10 of the Mercer CFA Institute’s Global Pension Index.

The index compares 48 retirement income systems around the world using more than 50 indicators, with a particular focus on adequacy, integrity and sustainability.

The research’s primary aim is to benchmark each retirement income system, but it also highlights areas of reform which could provide greater trust in the pension system of each country as well as increased sustainability and improved benefits.

The UK’s pension system has been ranked as the 11th best system in the world with a value of 71.6, dropping one place since 2023 and out of the top 10. The Netherlands, Iceland and Denmark retained their top three spots for another year.

The index reports that the value for the UK system could be increased by further increasing the coverage of employees and self-employed in private pension schemes, restoring the requirement to take part of the benefit as an income stream (ie not allowing individuals to take all of their retirement savings as a lump sum) and increasing the scope and contribution levels required under auto-enrolment.

Stuart Price, Partner and Actuary at Quantum Advisory, said: “It is disappointing to see the UK’s pension system slip out of the top 10 of the Global Pension Index this year. Its ranking places it as a ‘B’ grade system within the index, suggesting that the system has a sound structure and many good features but that there are clear areas for improvement and reform.

“The state pension only provides 22% of an individual’s average earnings, so private pension saving, whether in defined benefit, defined contribution or collective defined contribution schemes, is crucial to allow people to retire with a decent level of income and at a reasonable age.

“All employers must provide a workplace pension scheme or arrangement and automatically enrol employees into it. Auto-enrolment has worked to a degree but would benefit from further reform which could improve the UK’s index ranking. The number of individuals saving for their retirement has increased substantially since auto-enrolment was introduced in 2012, with 76% of the working population contributing to their pension schemes.

“However, auto-enrolment could be extended to include younger workers from age 18, lower earners and the self-employed, in addition to increasing the total contribution rates from 8% to at least 12%. Following a review in 2017 which received royal assent in September 2023, plans are in place to lower the age of eligibility for auto-enrolment but frustratingly no date has been set to introduce this legislation.”

Business, Business Advice, Economy & Jobs News, Wales

Recruitment, trade and taxation sticking points for businesses in Q3

Businesses in Wales have revealed the opportunities and challenges they faced in Q3 of 2024 in Chambers Wales South East, South West and Mid’s latest Quarterly Economic Survey.

Businesses in Wales who trade goods and services domestically performed well. Over two thirds (68%) of businesses taking part in the survey traded in the UK only. 38% of these businesses stated that there had been an increase in UK sales and 33% reported an increase in orders and advanced bookings, with both of these figures up from Q2.

It was a mixed picture, however, for Welsh businesses who trade internationally. Almost a quarter (23%) of businesses in Wales shared that their export sales had increased in the last three months, up from 15% in the previous quarter, but only 7% saw export orders and advanced bookings increase in Q3.

David Peña, the Chamber’s International Trade Manager, said: “Many of the survey respondents cited new markets as an opportunity for their business so we need to ensure that those who wish to export can access the guidance, support and contacts they need to fully achieve their trade ambitions.

“Welsh businesses have so much to offer on the international stage. Different markets bring different challenges, and penetrating these markets requires innovation and information. We heard several inspirational success stories from exporters across Wales at our recent exporting excellence event held in collaboration with our partners Atradius and Welsh Government, showing how the right support and ideas can make exporting a reality.”

The Quarterly Economic Survey for Q3 also revealed that recruitment continues to be a sticking point for many businesses in Wales.

54% of the businesses surveyed attempted to recruit staff in the last quarter, primarily for full-time positions. 79% experienced difficulties recruiting, particularly for professional and managerial positions, citing a lack of appropriate, experienced candidates and skills requirements not being met.

While recruitment and retention remain an issue, an improved economic picture has led to a shift in which external factors are more of a concern to businesses in Wales than they were three months ago. 55% of businesses in Wales stated that taxation was more of a concern this quarter, more so than interest rates, business rates and inflation.

Paul Clark, President at Chambers Wales South East, South West and Mid, said: “With an ongoing skills shortage in the private sector and concerns regarding taxation, businesses in Wales will be watching the Autumn Budget later this month with great interest. Throughout the election campaign and their time in office to date, the government has repeatedly stressed its commitment to boosting economic stability and growth, and the Budget will be chance to set these measures to develop the economy and remove barriers to a higher growth future.”

Accountancy & Accounts, FInance, Finance and Banking, Finance News, Sustainability

New diploma from ACCA sets the global standard sustainability in finance

  • The qualification has been developed in response to the demand for skills and training in sustainable finance.
  • ACCA has worked with global regulators on their requirements for sustainability auditors, and the new professional diploma has been designed to meet their needs.

 

In response to growing demand from businesses and professional accountants, ACCA has launched a pioneering Professional Diploma in Sustainability, designed for finance professionals at all levels who are looking to gain a comprehensive understanding of sustainability and accreditation to prove it.

Businesses often lack the essential skills to support the move to more sustainable business models and urgently need the skills to consider non-financial as well as financial business drivers, according to research by ACCA.

The professional diploma brings together high-quality learning support and assessment, aligning with the increasing demand from employers, as well as individuals, wishing to pursue the widening career opportunities related to sustainability, and emerging regulatory requirements around the world.

ACCA has been working closely with regulators globally on their requirements for sustainability auditors and this new professional diploma has been designed to meet their needs. Once completed, the professional diploma provides a comprehensive accreditation in the core areas of sustainability.

This leading-edge qualification builds on the increasing number of sustainability learning opportunities ACCA has added to its portfolio in recent years, as well as the addition of more sustainability content into the ACCA Qualification.

The Professional Diploma in Sustainability consists of a comprehensive, integrated learning programme, in-depth knowledge, a revision kit, and a three-hour exam. Offering over 60 hours of learning and practice across four certificates and one exam, learners will gain in-depth knowledge of sustainability frameworks and ethics, sustainability strategy and management, sustainability reporting and sustainability assurance.

Helen Brand, chief executive of ACCA, said: “The expertise of accounting and finance professionals in driving sustainable approaches to business is absolutely essential if we are to make the progress the planet so desperately needs.

“With their central role working in and for countless businesses and organisations across the world, professional accountants are well placed to play a key role in shaping the future we need. This new qualification is designed to help meet that increasing need and recognises that success is not now just about profits, but about sustainability and social value too.”

Lloyd Powell, head of ACCA Cymru/ Wales noted: “Sustainable organisations that create long-term value for society will be the bedrock of our future economy – and professional accountants will be at the heart of these organisations. This specialist diploma will support them as they drive positive business change and support the Welsh economy.”

 

Visit ACCA’s website for more information.

Accountancy & Accounts, Business, FInance, Finance and Banking

ACCA welcomes government action on late payment

Government action on late payment has been welcomed by leading accountancy body ACCA.

 

The announcement by Jonathan Reynolds, Secretary of State for Business and Trade, of a new Fair Payment Code to replace the Prompt Payment Code is the first step in the right direction.

 

Glenn Collins, head of technical and strategic engagement at ACCA, said: “We are pleased to see this move by the government today. ACCA has been a consistent and vocal supporter of the need to ensure small businesses are paid on time and have clear knowledge of the payment practices of who they are doing business with. It is a great first step but there will be more work to do. We look forward to participating in the consultation on the proposed new laws.

 

“Late payment and unfair practices continues to blight small businesses across the UK. We have long called for urgent implementation of proposed improvements to tackle late payment problems, including expansion of prompt payment reporting and the proposed expansion of powers for the Small Business Commissioner (SBC).  We are glad that some initiatives are now being taken.”

 

Lloyd Powell, head of ACCA Cymru/Wales, added: “Small businesses account for more than 99% of businesses in Wales. It is vital that they are able to get paid on time, as cashflow drying up can be a serious problem for them, more so than larger businesses.

 

“We are pleased that the SBC has been given extra powers to tackle some of the defaulters under the old code, however we will be calling for additional reforms to provide more transparency in this area.

 

“Clearly this is voluntary, but we urge Welsh businesses across the supply chain to see how they can sign up to this enhanced code and work together to eradicate the scourge of late payment.”

 

Based on the insight from members over the last two decades, ACCA is clear that late payment is a persistent problem in the UK. Poor payment practices have a domino effect throughout supply chains, with severe consequences for cashflow and the survival of SMEs. To rectify this situation, strong action – including a decisive culture shift – is required.

Accountancy & Accounts, Economy & Jobs News

Finance teams – evolve now or become irrelevant

A comprehensive new report reveals that finance teams worldwide are at a critical juncture, with just five years to adapt to rapidly changing demands—or face the risk of becoming obsolete.

Finance teams have just five years to transform or risk becoming irrelevant, according to a new report by ACCA (the Association of Chartered Certified Accountants) and Chartered Accountants ANZ in association with PwC. The report, Finance evolution: Thriving in the next decade, stresses the vital role finance teams play in building sustainable businesses and urges CFOs and finance leaders to take immediate action.

Drawing on insights from over 150 finance professionals and 2,300 survey responses, the report shows that businesses now demand a broader skill set from their finance teams, as retrospective reporting and traditional approaches to planning and forecasting alone no longer meet key decision-makers’ needs. Being pre-emptive is the order of the day.

The report highlights some ongoing concerns raised by survey respondents:

  • A lack of clarity on how finance can add value to the business (38%)
  • Finance being seen mainly as a cost centre (32%)
  • Current technology not meeting the needs of the organisation (30%)

Finance teams must embrace technologies like artificial intelligence, machine learning and data analytics, to enhance decision-making and operational efficiency. These technologies help finance teams reduce manual tasks, boost efficiency, and be recognised as key drivers of growth rather than merely number crunchers. The role of finance has also expanded to include leadership on long-term value creation including sustainability issues.

However, the report also emphasises that as finance teams undergo this transformation, the importance of ethics must remain at the forefront. With the increasing reliance on technology and data, maintaining a strong ethical foundation is crucial to building and sustaining trust.

Helen Brand OBE, Chief Executive of ACCA, said: “For finance teams to stay relevant, they need to look ahead. CFOs and finance leaders must ensure they are measuring both the long-term and short-term goals of sustainable business models effectively. The role of the CFO is fast evolving beyond finance to encompass wider value creation and management.”

Ainslie van Onselen, Chief Executive Officer of Chartered Accountants ANZ, stated: “While the arrival of new technology presents exciting opportunities to radically transform and improve the way we work, the one thing that must never change is our profession’s strong ethical standing.  While we upskill and future proof our technology capabilities, we must also remain firmly focused on the ethical role that financial professionals – especially Chartered Accountants – must play.”

Moreover, the report highlights significant skill deficits in the areas of digital, data, and sustainability. Addressing these gaps is essential for finance teams to lead effectively in the next decade.

Simon Seymour, Partner at PwC, noted: “Respondents highlighted their biggest skills gaps as digital skills, data skills and sustainability skills.  A critical question for the industry, as a whole, is why these skills gaps remain so pronounced and how far organisations should go to own the skills agenda, and not just rely on traditional training.”

The report is a clear call for action: finance teams must embrace new technologies, develop critical skills in digital, data, and sustainability, and uphold the highest ethical standards to ensure they remain integral to their organisations’ success in the years to come.

Read the report online.

Finance and Banking, News

R3 responds to May 2024 insolvency statistics

  • Corporate insolvencies decreased by 6.4% in May 2024 to a total of 2,006 compared to April’s total of 2,144, and decreased by 21.2% compared to May 2023’s figure of 2,547.
  • Corporate insolvencies increased by 5.8% from May 2022’s total of 1,896 and increased by 48.8% compared to pre-pandemic levels in May 2019 (1,348).
  • Personal insolvencies decreased by 3.5% in May 2024 to a total of 9,266 compared to April’s total of 9,605, and increased by 2.9% compared to May 2023’s figure of 9,003.
  • Personal insolvencies decreased by 7.2% from May 2022’s total of 9,986 and decreased by 15.7% compared to pre-pandemic levels in May 2019 (10,989).

Dave Broadbent, chair of the UK’s insolvency and restructuring trade body R3 in Yorkshire, and partner at Begbies Traynor in York and Teesside, comments on the release of the May 2024 corporate and personal insolvency statistics for England and Wales:

“The month-on-month fall in corporate insolvencies is driven by lower numbers of Administrations, Compulsory Liquidations and Creditors’ Voluntary Liquidations (CVLs), while the reduction in numbers we’ve seen compared to May 2023 is mainly driven by a fall in Administrations and CVLs. However, levels of corporate insolvency are still higher this month than they were in May 2019, and this is because CVL levels are higher – significantly higher – now than they were then, as a greater number of directors are closing their businesses after four tough years of trading during and post-pandemic.

“The business climate remains challenging due to a variety of short and long-term issues. Inflation levels, cautious consumer spending, and the costs of energy and fuel have been affecting businesses for months, while shorter-term issues like the rain we experienced in April and May will have hit firms in the construction, retail and hospitality sectors.

“Retail and hospitality will have seen a lower footfall as a result of the wet weather over the last couple of months, and this will have been another blow after a tough start to the year, a poor Christmas trading period and the longer-term impact of people spending less. However, these industries will be hopeful the Euros will bring an increase in footfall and spending in England and Scotland, which may help make up for a slow start to the year.

“The rain will have also caused delays and disruption to construction projects, which will create additional issues for a sector that had seen a reduction in new work at the end of last year and the start of this one.

“Another factor affecting businesses is the wait for the Monetary Policy Committee’s decision on the Bank Rate of interest as the impact this announcement has on everything from leasehold agreements to foreign exchange rates may have resulted on firms choosing to enter or choosing to delay entering an insolvency or restructuring process depending on the timings of their current arrangements. The Committee’s decision is also likely to affect businesses in the future, given the impact it has on a range of areas of commercial and international finance.

“When it comes to trends in insolvency and restructuring over the next couple of months, I would expect the liquidation numbers to soften slightly, and mid-market businesses to look towards exploring their options for Restructuring Plans as the recent ruling on Tasty plc’s proposals will potentially open up the market for this process to firms of this size, but with low market expectation of an interest rate cut before the August Monetary Policy Committee sitting at the earliest, it could be a slow summer for restructurings.

“Despite the challenges businesses face and the uncertain political and economic climate, they are generally more optimistic about the coming months, and many expect output and sales levels to rise and are planning to recruit extra staff. With the economy growing in the first quarter of this year and predicted to grow again in the next quarter, the tide may be about to turn for the better.

“Turning to personal insolvencies, the month-on-month fall in numbers is due to fewer people entering a Bankruptcy and Individual Voluntary Arrangement (IVA) last month, while the annual increase in personal insolvency numbers is due to a rise in Debt Relief Orders after the entry fee for this process was removed in April of this year. Personal insolvency numbers are lower than they were in April 2019, and this is due to fall in Bankruptcies and IVAs.

“The number of people entering a Breathing Space has also increased slightly compared to last month, and it’s clear that there is still ongoing demand for debt support in England and Wales, but that people are increasingly entering processes like DROs that allow them to come to an arrangement with their creditors, or like the Breathing Space, which allows them a respite from creditor pressure while they attempt to find a solution to their financial issues.

“It’s also clear the cost of living is continuing to hit consumers. Paying for the essentials remains a challenge as food, fuel and energy prices continue to rise, and while inflation is coming down and the energy price cap is set to fall from July, costs still remain high for households, with energy prices well above what they were three years ago. As a result, people are still looking to save money – either to meet ongoing costs or to spend later on in the year.

“We urge anyone who is worried about their finances to seek advice as soon as possible. We know how challenging it is to talk about your money worries, but taking that step and starting that conversation when the problem is new will give you more options for resolving it and more time to consider your next step.

“Most R3 members will give potential clients a free consultation so they can learn more about their situation and explain which options are potentially available to resolve it.”