Company insolvencies rise across England and Wales
A worrying rise in companies collapsing last month shows that many UK firms are in a “perilous” position as 2024 draws to an end.
New data from the Insolvency Service this morning shows there was a 13% increase in registered company insolvencies in England and Wales in November, to 1,966.
That may intensify concerns that the economy is weakening, following data yesterday showing firms are cutting staff this month.
On an annual basis, though, that’s 12% lower than in November 2023 when 2,243 firms went under.
The Insolvency Service reports that there were 254 compulsory liquidations last month, plus 1,565 creditors’ voluntary liquidations (CVLs), 132 administrations, 14 company voluntary arrangements (CVAs) and one receivership appointment.
David Hudson, restructuring advisory partner at business advisory firm FRP, says:
“Despite a year-on-year fall, a shorter-term ramping up of insolvencies amid the festive season is a stark reminder of the perilous financial position many firms find themselves in.
“Insolvency levels have remained high throughout the course of the year and, despite improving economic conditions – including lower levels of inflation and rate cuts – we anticipate them remaining so in 2025 as firms continue to carry unsustainable levels of debt.
“Increased National Insurance contributions will add to firms’ costs next year, and businesses in consumer-led sectors like retail, leisure and hospitality are likely to be at risk should Christmas trading prove underwhelming.
“The volume of administration processes – which are more likely to involve large employers than general company winding ups, and have been in flux in recent months – will be an important barometer of business health over the next 12 months.”
Key events
Closing summary
Time for a final recap.
A worrying rise in companies collapsing last month shows that many UK firms are in a “perilous” position as 2024 draws to an end.
New data from the Insolvency Service this morning shows there was a 13% increase in registered company insolvencies in England and Wales in November, to 1,966.
That may intensify concerns that the economy is weakening, following data yesterday showing firms are cutting staff this month.
UK pay growth accelerated to 5.2% in October, putting pressure on the Bank of England to resist calls for lower interest rates when policymakers meet later this week.
The Office for National Statistics (ONS) said annual growth in employees’ average earnings – which had been slowing for more than a year – jumped after a significant rise in wages paid for skilled workers in the manufacturing sector.
Wages rose 4.4% including bonuses and 4.9% excluding bonuses in the three months to September, but both hit 5.2% in the three months to October.
The rise in pay for factory workers to 6% meant the split between civil servants and private sector employees widened. Annual average regular earnings growth was 5.4% for the private sector and 4.3% for the public sector, the ONS said.
Our other main stories today:
Thank you for reading. We’ll be back tomorrow. Take care! – JK
In Canada, inflation dipped below the central bank’s 2% target in November, driven by Black Friday discounts, which should reverse this month.
Headline inflation, as measured by the annual change in the consumer prices index, dropped to 1.9% from 2% in October, official figures showed.
Thomas Ryan, North America economist at Capital Cconomics, said:
The Bank will probably choose to look through the decline in headline inflation, given it was supported by temporary factors.
It cannot do the same, however, for the second consecutive strong 0.3% month-on-month gains in the CPI-trim and CPI-median measures, given they excluded the large price falls in the consumer goods-related components (and the jump in travel services). The 3-month annualised rate for the average of the two is now at 3.3%, above the upper limit of the Bank’s 1% to 3% target range.
We do not think this is enough for the Bank to call time on its easing cycle but, paired with the recent pick-up in some of the activity data, it confirms that the Bank will start moving in smaller 25bp increments and raises the chance of a pause at the meeting next month.
Industrial output in the United States fell slightly last month, confounding economists who had expected a rise, while the manufacturing sector posted a small increase.
Industrial output slipped by 0.1% in November from October, following October’s 0.4% drop. Analysts had expected a rise of 0.3%. Mining and utilities production both declined, by 0.9% and 1.3% respectively.
Manufacturers fared better, recording 0.2% growth in output although this was also worse than expected, and came after a downwardly revised fall of 0.7% in October.
U.S. industrial production fell 0.1% in Nov (after -0.4% in Oct). Manufacturing rose 0.2%, led by motor vehicles (+3.5%), while mining (-0.9%) & utilities (-1.3%) declined. Capacity utilization dropped to 76.8%, below the 1972–2023 avg. Mixed results across sectors. pic.twitter.com/FRjfGMQBze
— Econoday, Inc. (@Econoday) December 17, 2024
2024 ‘the year of the bond’
Investors have poured more than $600bn into global bond funds this year, a record sum, taking advantage of some of the highest yields in decades, ahead of an uncertain 2025.
Slowing inflation has allowed central banks to lower interest rates, pushing investors to lock in the high yields available in the “year of the bond”. As of mid-December, $617bn had flowed into developed and emerging market bond funds, according to Reuters, citing financial data provider EPFR, putting 2024 on track to be a record year.
Bond yields tend to fall, and prices rise, when central banks reduce short-term borrowing costs.
Vasiliki Pachatouridi, head of EMEA iShares fixed income strategy at BlackRock, told Reuters:
The story is income. We are seeing the income being put back into fixed income. We haven’t seen these levels of yields in almost 20 years.
Another $670bn has been invested in stock markets, as indices in the US and Europe scale new heights. Cash equivalent money market funds, which boast high yields and little risk, have fared the best, pulling in more than $1 trillion.
Corporate bonds, which offer higher yields than equivalent government debt, have proven particularly popular. The yield on the ICE BofA global corporate bond index has fallen to its lowest over risk-free government debt since before the financial crisis in 2007.
UK proposes letting tech firms use copyrighted work to train AI
Campaigners for the protection of the rights of creatives have criticised a UK government proposal to let artificial intelligence companies train their algorithms on their works under a new copyright exemption.
Book publishers said the proposal put out for consultation on Tuesday was “entirely untested and unevidenced” while Beeban Kidron, a crossbench peer campaigning to protect artists’ and creatives’ rights, said she was “very disappointed”.
Under the proposals, tech companies will be allowed to freely use copyrighted material to train artificial intelligence models unless creative professionals and companies opt out of the process.
The changes are seeking to resolve a standoff between AI firms and creatives. Sir Paul McCartney has warned the technology “could just take over” without new laws while the government has warned “legal uncertainty is undermining investment in and adoption of AI technology.”
Julia Kollewe
Despite growing use of card payments, there is always going to be a role for cash, MPs heard from the Post Office, the Association of Convenience Stores, the union representing shop workers and others.
The Commons Treasury committee held a hearing on the acceptance of cash this morning. Several witnesses talked about how important cash still is to many people, including the elderly and those on low incomes because they find it easier to stay within their budget.
Carrie Aspin, senior researcher at the Union of Shop, Distributive and Allied Workers, told MPs:
We represent 365,000 members, and a large portion of them are low paid workers. We know that for a lot of our members, cash is really important in terms of budgeting and managing their finances. So we do see a future for cash.
We think it’s not just a choice that consumers are making, and we think it’s absolutely necessary for low paid workers and for more vulnerable groups across society, and we’re seriously concerned that the decline in cash acceptance is going to lead to people being left behind.
Others said cash is important to have as a back-up in case of outages.
James Lowman, chief executive of the Association of Convenience Stores, told the committee:
I think some customers will always prefer to use cash. There are some consumers who are unbanked.
Retailers of all kinds will be reluctant to be entirely reliant on card payments. When you think back earlier this year, the CrowdStrike issue, for example, where, due to some problems with the online antivirus security system, a number of card payment systems went down for certain retailers. It’s luck of the draw, really, about how you were affected.
The CrowdStrike outage in July caused havoc across a swathe of industries spanning the global economy.
Airlines, railways, hospitals, television stations, sports clubs and financial systems were among the sectors hit by the technology glitches, prompting national governments to convene emergency meetings and stock markets to fall.
Ross Borkett, banking director of Post Office Limited, said:
Our postmasters across the country are providing an increasing amount of cash services. Last month alone, we served over £3.5bn in cash transactions. It’s a staggering amount of of money that we are supporting communities with, and we are seeing that grow month on month. And so we absolutely see it as a really important part of support to communities, but we don’t see it going away. We will see it decline slowly over time, but remain a very, very important payment method for many people.
Mark Sweney
After more than 1,000 days, the inquiry into the Post Office Horizon IT scandal has been wrapping up today.
And Paula Vennells’ legal team has told the inquiry to treat the evidence of some witnesses “cautiously”, as a desire for “self-preservation” means that they were trying to scapegoat the former Post Office chief executive for the scandal.
Samantha Leek KC, delivering the closing statement on behalf of Vennells to the public inquiry on Tuesday, said that as Vennells has become a high-profile figure in the scandal others have tried to “point the finger at her”.
She told the inquiry:
“When witnesses have given recent evidence of matters relevant to Ms Vennells without it being supported by contemporaneous documents, this evidence should be approached cautiously.
“It is inevitable, having regard to the very human desire for self-preservation, that witnesses will now seek to distance themselves from Ms Vennells.”
Barclays will seek to appeal after losing its bid to overturn a key ruling on motor finance commission (see earlier post).
A Barclays spokesperson says:
“This challenge related to a single, specific case on which we disagreed with the Financial Ombudsman Service’s decision.
We are disappointed in the court’s ruling and will be appealing.”
The case is likely to affect a potential multibillion pound redress scheme from Britain’s finance watchdog, related to the commissions which customers paid when consumers bought a car on credit.
Stephen Haddrill, director general of the Finance & Leasing Association, has said:
“We note the High Court’s decision, which relates to a single case and which Barclays is planning to appeal. With the Supreme Court due to discuss similar issues in spring 2025, we look forward to that process.”
Despite signs of economic weakness, it would be a big shock for the City if the Bank of England votes to cut interest rates this week, at its final meeting of the year.
Shaan Raithatha, senior economist at Vanguard, says the Bank has signalled strongly that it will ease policy “gradually”, explaining:
Expect no change to policy on Thursday. Eyes will be focused on how the MPC are interpreting the effect of the employer NIC hike on growth and inflation. Early data suggest employment expectations have slowed sharply.
This skews the risks to a more dovish outlook, relative to our forecast of Bank Rate ending 2025 at 3.75%, one percentage point lower than today.”
Andrew Wishart, economist at Berenberg says “A cut is a luxury the BoE cannot afford”, adding:
“Persistent price pressures will prevent the Bank of England (BoE) from responding to flat output and falling employment by cutting interest rates this Thursday.
Swati Dhingra, the most dovish member of the Monetary Policy Committee (MPC), may advocate a cut by arguing that diminishing competition for workers will lower pay growth and inflation over time. But recent increases in pay growth and leading indicators of inflation alongside concerns that the increase in taxes on employment announced in the 30 October budget will be inflationary should convince the majority of the MPC to stick to a gradual (i.e. once per quarter) pace of rate cuts. We expect an 8-1 vote to keep bank rate unchanged at 4.75% on 19 December ahead of a third 25bp cut on 6 February.
Luton Stellantis factory workers protest closure plans
In Luton, Stellantis workers have begun a two-day protest and a rally over the company’s plans to shut its electric van factory.
The Unite union is calling for Stellantis to halt its plans to shut the Luton factory, which were announced just days before the shock departure of CEO Carlos Tavares.
Unite want “proper negotiations” between workers, management and government over the future of the plant.
Unite general secretary Sharon Graham said yesterday:
“Shutting the profitable Luton factory when it has just been made ready to produce electric vehicles from 2025 makes no sense. Time has now rightly been called on Carlos Tavares, whose counterproductive strategy of cutting Stellantis to the bone to artificially inflate profits has clearly failed.
“The opportunity is now there for Stellantis to prevent the needless destruction of its Luton operations.
Julia Kollewe
The £3.3bn takeover of the UK soft drinks maker Britvic by the Danish brewer Carlsberg has received the go-ahead from Britain’s competition watchdog, raising fears of job losses.
The Competition and Markets Authority said it had cleared the proposed deal, a day before the deadline for the first phase of its investigation into the takeover.
The watchdog began studying the deal in late October and said it would publish a full statement with the reasons for its decision to approve the deal later on Tuesday.
Britvic, which makes well-known drinks such as Robinsons squash, J20 and R White’s lemonade, accepted a £13.15-a-share offer from Carlsberg in July.
The company will be called Carlsberg Britvic, and combine Britvic’s soft drinks portfolio with Carlsberg’s beer offering, which includes Kronenbourg 1664 and Brooklyn, creating a beverage “powerhouse” in the UK and elsewhere in Europe, according to the Danish company. The deal is expected to be completed in January.
Campaigners urge high court to block £3bn Thames Water bailout
Sandra Laville
Campaigners have gathered outside the high court in London calling for judges to block a financial bailout of struggling Thames Water.
MPs, activists and members of the public were protesting on Tuesday outside the court where the privatised water company was seeking a £3bn financial lifeline (as explained in earlier post).
The company is trying to secure approval from the high court for the money – referred to as a “liquidity extension” – which some creditors have already agreed to lend. Without this extension, the company, which has debts of £15bn, says it will run out of cash by next March.
Analysis by the campaign group We Own It, who were protesting outside the courts, estimates that the bailout, if approved, will cost customers £250 a year each.
Budget blamed for rising insolvencies
Fallout from October’s Budget and ongoing cost issues are driving up corporate insolvencies, reports Tim Cooper, President of R3, the UK’s insolvency and restructuring trade body.
Cooper says:
After years of rising outgoings and falling margins, businesses are facing further increases in wages as a result of the Chancellor’s announcement and this could be an expense too far for some firms.
“Members are telling us that enquiries have increased over the last month, as firms look to restructure or have early conversations about their financial concerns or their insolvency options ahead of the new year.
This kind of activity won’t be reflected in the current set of insolvency statistics, but it provides an insight into the mood, challenges and concerns of the business community as we come to the end of another difficult year.
Here’s Benjamin Wiles, UK Head of Restructuring at Kroll, on today’s insolvency statistics:
“In terms of company administrations, while our data shows we expect to see a small increase compared to last year, what today’s figures don’t reflect is a bigger pick up in restructuring activity. There of course are many companies experiencing distress, where an insolvency is the only way to save the business. However, I’d say the majority of companies we have advised have come away with a solvent solution. Whether that’s refinancing, restructuring debt or capital injections.
“Following the Budget, there is understandable interest in sectors like hospitality, leisure and care homes. The new measures won’t take effect until the Spring, so it’s unlikely we will see an immediate uptick in insolvencies post-Christmas, however, these businesses are beginning to plan now in anticipation.”