Insolvency figures in England and Wales saw a dip in August, offering some respite to businesses, particularly in the retail and hospitality sectors, amid a summer of sport and warm weather.

Approximately 10,000 individuals were declared insolvent in August 2024, marking a 5% drop from July's figures but still representing a significant 16% increase compared to the same month in 2023.

The latest data includes 594 bankruptcies, 4,166 debt relief orders (DROs), and 5,240 individual voluntary arrangements (IVAs). The decline in insolvencies from July has been attributed, in part, to the boost in activity seen in the retail and hospitality sectors, buoyed by a packed summer sports schedule and favorable weather.

However, other sectors, particularly business services, construction, and engineering, continue to face challenges, with the Midlands seeing a noticeable spike in insolvency cases.

Despite this short-term improvement in retail and hospitality, sectors like business services, construction, and engineering remain under strain.

Pressures face the engineering sector, particularly within the automotive supply chain, which has contributed to an increase in insolvency numbers across the Midlands, where this industry is heavily concentrated. The Midlands accounted for 17% of overall insolvencies in August 2024, up from 14% in the same month last year.

Recent statistics also point to a surge in debt relief orders, which have reached record levels over the past five months. Meanwhile, individual voluntary arrangements have remained consistent with the monthly average over the past year, and bankruptcy figures continue to sit at around half of pre-2020 levels.

Jennifer Lockhart, partner and insolvency specialist at Brabners, commented on the overall picture, saying, "Fewer businesses failing is always to be welcomed, but overall insolvency levels continue to reflect the challenging environment businesses are operating in."

She noted that while costs have become more predictable, persistently high interest rates and waning optimism following the recent government change have curbed improvements in consumer confidence.

Lockhart pointed out that SMEs may take some comfort from government plans to pass new legislation addressing poor payment practices, but the effects of this are likely to take time to materialize.