The Insolvency Service recently published statistics showing that the number of corporate insolvencies in England and Wales reached a 30-year high in 2023.

This follows similar findings being recorded in both Scotland and Northern Ireland.


The pressures of higher interest rates, increased costs, and cautious consumer spending are all combining to push many companies to the brink – making it a challenging time for business owners, their employees, trade partners and financiers.

It begs the question as to what can be done to stem the tide of insolvencies in the face of these challenges. Part of the solution for struggling businesses potentially lies in government reforms introduced during Covid.

In the first half of 2020, at the outset of the Covid pandemic, there was an expectation that insolvencies would spike because of lockdown. The UK Government’s response to avert this was essentially two-pronged. The first aspect was to provide businesses with a package of financial support measures, such as the furlough scheme and government-backed loans.

The second, which gained less attention outside legal and professional advisory circles, was to implement significant legislative reforms that updated and enhanced the UK’s legal framework for corporate restructuring. This saw existing tools like the scheme of arrangement, administration, and company voluntary arrangement (CVA) being supplemented with the introduction of new tools like the “restructuring plan”.

In broad terms, a restructuring plan is effectively a court-sanctioned agreement with creditors that allows a company to have its unworkable debt-loads and capital structures right-sized so that it can continue as a going concern without having to close down and enter a more terminal insolvency process.

Unlike the Covid financial support schemes, which were always intended to be temporary measures and have expired, the enhanced corporate restructuring framework is still in place.

Although many restructuring tools harbour negative connotations of business failure, this is largely because the positive outcomes are all too often overlooked. If deployed at the right time and used correctly, these tools can give businesses a better chance of being saved, if not under existing management, then at least by way of a sale of all or parts of the business as a going concern.

More publicity for the success stories can only be a good thing and may go some way to addressing the disparity between the large corporates – who have ready access to advisers and tend to spot warning signs at an earlier stage – and smaller companies who might only turn to advisers when it is often too late.

While it is true that certain restructuring options are more time and resource intensive (and therefore won’t always be appropriate or realistic for many smaller businesses), if directors had a greater awareness of the corporate rescue tools that are out there, there would be an increased chance of them seeking advice at an earlier stage, and we would likely see more restructurings as opposed to insolvencies.

First published in the Scotsman on 4th March 2024

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