Sharp rise in company debt judgments in England and Wales

Sharp rise in company debt judgments in England and Wales

Registry Trust has just published the latest data on the number of judgments registered against consumers and businesses in the UK. What stands out is the sharp rise in judgments taken out against incorporated businesses, typically limited companies, in England and Wales in Q3 2024 and throughout 2024.

England and Wales is by far the largest jurisdiction covered by Registry Trust. Incorporated judgments more than doubled, by 107%, from 22,328 in Q3 2023 to 46,226 in Q3 2024. Incorporated judgments rose much faster than those taken out against consumers.

The total value of debt against incorporated businesses also rose but by much less, up 24% from £103 million to £127 million over the same period. As a result, the average value of the debt judgments fell significantly by 40% from £4,585 to £2,743 over the period. Claimants have been taking out significantly greater numbers of, but smaller value, judgments.

In contrast to judgments for incorporated businesses, the number of judgments against unincorporated businesses, typically partnerships and sole traders and therefore smaller, fell by 5%, from 6,613 to 6,291, over the same period. The total value of unincorporated judgments registered fell by 3%, from £22.7 million in Q3 2023 to £22 million in Q3 2024. The average value of debt saw a small increase from £3,429 to £3,508.

Looking at consumer debt, we saw a different pattern from commercial judgments. The total number of judgments registered against consumers rose slightly by 4%, from 224,152 in Q3 2023 to 234,047 in Q3 2024. The value of debt registered against consumers increased by nearly one-fifth (19%), from £391 million to £463 million. This means the average value of debt against consumers rose by 13%, from £1,744 to £1,980.

Medium-longer term picture

To get a better picture, it is worth looking at medium-longer term data. It is notable that in the first three quarters of 2024, there were nearly 114,000 judgments registered against incorporated businesses. That is higher than the full year totals for each of the previous five calendar years 2019-2023. The number of incorporated business judgments in each quarter (Q1, Q2, and Q3 of 2024) was higher than in their equivalent quarters in each of the previous five years.

Chart 1: incorporated and unincorporated judgments, company insolvencies, and consumer judgments, England and Wales

Source data: Registry Trust, The Insolvency Service

Even if the growth slows down, we could be looking at incorporated business judgments reaching well over 140,000 for the full calendar year 2024. If the rising trend continues in the fourth quarter, the total could reach 150,000 for the full year.

Of course, claimants may well have been playing ‘catch up’ after the pandemic and incorporated business judgments could fall back again. But, even if they do, as mentioned, the number of judgments in 2024 has already surpassed the full year calendar year figures for the previous five years. So, we are looking at full year results for 2024 significantly higher than any of the previous five years. Whatever happens, 2024 has been a bad year for incorporated business judgments, certainly over the recent period.

The period 2019-24 incorporates the pandemic years when special measures were in place to protect consumers, businesses, and the economy. During this period, claimants in both the consumer and commercial sectors did exercise forbearance, and the number of judgments fell considerably across the board.

Post the pandemic special measures, consumer judgments then rapidly shot back up. From Q1 2021, consumer judgments have more or less stabilised, averaging around 210,000 judgments per quarter, remaining well below the levels seen in the run up to the pandemic.

Incorporated business judgments show quite a different path. Incorporated business judgments also rose sharply post pandemic but nowhere near as rapidly as consumer judgments. We then saw a few years where incorporated business judgments stabilised and then averaged around 23,000 a quarter. But this year saw large, consecutive quarterly rises in corporate business judgments. Unlike consumer judgments, incorporated business judgments are well above the immediate pre pandemic levels. We intend to publish longer term analysis of patterns in commercial judgments in the near future.

Judgments for unincorporated businesses also saw a rise post pandemic, up 20% from 21,575 in 2020 to 25,971 in 2022. But numbers appear to have stabilised post pandemic, remaining well below the 2019 pre pandemic level.

Total company insolvencies did rise sharply, nearly doubling from 12,631 in 2020 to over 25,000 in 2023. Previous Registry Trust analysis identified a strong link between companies being in financial distress, as measured by having a debt judgment, against them subsequently going on to become insolvent. Thirty five percent of the companies in the research sample went on to become insolvent after having just one judgment against them. We will be watching the company insolvency numbers with great interest to see if the trends in debt judgments are a harbinger of further trouble for businesses.

[1] The Journey From CCJ to Insolvency

This article was originally published in CCTA Magazine on 28th November 2024