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Redundancies and insolvencies in Northern Ireland
The Northern Ireland Labour Market Report, published on 18 July 2024, puts the annual number of confirmed redundancies in Northern Ireland up to June 2024 at 2,560 – almost double the figure for the previous year (1,340). The Company Insolvency Statistics for Northern Ireland for June 2024, published on 19 July 2024, highlighted 17 corporate insolvencies in June 2024, which was 13% higher than in June 2023.
Understanding the statistics
As with any statistics, we must delve beyond the headlines to truly grasp their impact on the Northern Ireland market. The raw numbers tell one story, but the underlying trends and their broader implications reveal much more about our economic landscape.
Initial predictions and government intervention
When the COVID-19 pandemic hit the UK in March 2020, some commentators predicted a ‘tsunami of corporate failures and mass redundancies’. Thanks to the hard work of former Chancellor, Rishi Sunak, and the introduction of the Coronavirus Job Retention Scheme, commonly known as the “Furlough Scheme”, the predicted large number of redundancies did not occur.
Additional liquidity measures
A number of other liquidity measures, including the Bounce Back Loan Scheme (BBLS) and the Coronavirus Business Interruption Loan Scheme (CBILS), also played their part in staving off the large number of corporate failures many had predicted. Financial lifelines, in the form of loans and grants, were available to allow companies to survive the various lockdowns and the unprecedented drop in GDP in April and June 2020.
Economic challenges beyond the pandemic
Having recovered from the economic effects of the pandemic, we then had the Russia-Ukraine war and the subsequent energy crisis. High inflation and interest rates followed.
New insolvency procedures
The Corporate Insolvency and Governance Act 2020, which also applied to Northern Ireland, created two new insolvency procedures.
- Company Moratorium: Designed to give struggling businesses formal breathing space in which to explore rescue and restructuring options, free from creditor and other legal action. Except in certain circumstances, insolvency proceedings cannot be instigated against a company during the moratorium period.
- Restructuring Plans: introduced to support viable companies struggling with unmanageable debt obligations. These plans allow the Court to sanction a plan that binds creditors to a structuring plan if it is deemed fair and equitable. Creditors vote on the plan, but the Court can impose it on dissenting classes of creditors (“cram down”) if the necessary conditions are met.
Application of new procedures in Northern Ireland
Between 26 June 2020 and 30 June 2024, there was one moratorium in Northern Ireland. There were no Restructuring Plans. These figures suggest that these options may hold less relevance for the Northern Ireland market compared to more traditional restructuring options.
Labour market report insights
Based on the quick history lesson above, one might have expected the Labour Market Report in Northern Ireland to paint a bleaker picture. The UK economy slipped into mild recession in 2023, and the cost of living crisis continues. However, the anticipated surge in redundancies due to corporate failures has not materialised. In fact, the unemployment rate in Northern Ireland for March to May 2024 actually fell over the quarter and the year to 2.0%.
June 2024 insolvency statistics
In June 2024, Northern Ireland saw 17 company insolvencies - eight Compulsory Liquidations, seven Creditors’ Voluntary Liquidations, one Company Voluntary Arrangement, and one Administration. Each of these cases demonstrates financial distress for the company and employees involved. Yet, considering the economic backdrop, one might have anticipated a higher number of corporate failures.
Comparison with England and Wales
This picture contrasts sharply with the headline insolvency statistics from England and Wales, where registered company insolvencies in June 2024 reached 2,361 - 16% higher than in May 2024 and 17% higher than the same month in the previous year.
The number of company insolvencies there remained much higher than those seen both during the COVID-19 pandemic and between 2014 and 2019. The disparity suggests that Northern Ireland’s insolvency rate is proportionately lower than that of England and Wales. Whether this resilience will hold, or if the rising tide of corporate failures in England and Wales will eventually reach these shores, remains to be seen.
Future outlook with new government
Given the recent Labour Party landslide victory in the UK General Election, many are wondering how this shift will impact corporate failures and job redundancies. The new Chancellor, Rachel Reeves, is poised to play a crucial role. A former Bank of England employee, Reeves has continually stressed the importance of fiscal discipline, and given the current state of public finances, she may have no choice. It appears that the economic strategy is to grow the economy, and this will improve the Treasury coffers - easy to say but harder to deliver.
Conclusion
It seems that in 2024, Northern Ireland has been somewhat insulated from the wave of corporate failures sweeping through England and Wales. While specific factors contribute to this relative calm, the recent reports suggest that, despite ongoing economic pressures, we’ve seen more of a ripple than a tsunami of insolvencies.
As professionals in the restructuring sector, we constantly navigate the shifting economic tides and assess the challenges faced by companies. In recent years, many outside the sector may have imagined insolvency practitioners buried under a mountain of cases.
The reality is that the anticipated surge in corporate failures has not materialised. Clearly, this is positive news for the economy. Yet, with the recent economic headwinds, one can’t help but wonder if we are simply delaying the inevitable. Will 2025 finally bring the wave of corporate failures some have been expecting? Only time will tell.