Credit, Collections & Insolvency News
Latest Statistics from the Insolvency Service show that the number of registered business insolvencies in England and Wales in December was 33% higher than the number registered two years ago, just before the pandemic.
The data shows that there were 1,486 registered company insolvencies in December, with this 20% higher than a year earlier. The figures note a 73% two-year increase in creditors’ voluntary liquidations, where bosses elect to place their company into liquidation in order to pay its debts.
Business insolvencies fell by 11.4% in December 2021 to a total of 1,486 compared to November’s total of 1,678, and increased by 20.1% compared to December 2020’s figure of 1,237 and rose by 32.7% compared to December 2019 (1,120).
Of the 1,486 registered company insolvencies in December 2021, there were 1,365 CVLs, which is 37% higher than in December 2020 and 73% higher than in December 2019, 42 were compulsory liquidations, which is 2% lower than December 2020, and 75% lower than December 2019 and seven were CVAs, which is 84% lower than December 2020 and 67% lower than December 2019.
There were 72 administrations, which is 52% lower than December 2020, and 49% lower than December 2019; and there were no receivership appointments.
Christina Fitzgerald, president of restructuring trade body R3, said “The economic situation is pushing many company directors to voluntarily close their businesses before that decision is made for them”. December, she added, “marked a tough end to a torrid year for many businesses.”
“The monthly fall in corporate insolvencies has been driven by a reduction in all forms of corporate insolvency process. However, the annual and two-yearly increase in corporate insolvencies has been driven by a rise in Creditors Voluntary Liquidations, which suggests that the economic situation is pushing many company directors to voluntarily close their businesses before that decision is made for them.
“Despite the month-on-month fall in corporate insolvencies, December marked a tough end to a torrid year for many businesses. Increasing Covid cases, rising costs and falling consumer confidence hit footfall and sales, and company directors and management teams also had to work in the midst of new Covid restrictions, which will have affected day-to-day operation, customer behaviour and revenue levels.”
“This is especially true in sectors like retail and hospitality, who normally have their busiest periods in December, but faced an unhappy Christmas this year.”
“With the latest Covid restrictions set to last until the end of this month, business owners need to remain alert, and if the measures lead to their business becoming financially distressed, they need to seek advice as soon as this happens.”
“On the plus side employment is rising, but it remains to be seen whether wages will as well, as the economic effects of Covid continue to hit businesses.”
Responding to the figures, Federation of Small Businesses (FSB) National Vice-Chair Martin McTague said “Thousands of small businesses are on a knife-edge following a difficult and disappointing festive season, with surging inflation now eroding margins. The fresh support that the Government has promised to many firms is taking too long to reach the grass roots, and will not be enough to protect the futures of many when a jobs tax hike and business rates bills hit in April.”
“Today’s figures are a stark reminder that the nascent recovery from the pandemic needs to be nurtured, something that will be endangered if we lose too many of our small businesses. The wider small business community shrank in size by 400,000 in 2020. The Government should take action to address spiralling overheads, to avoid history repeating itself.”
“Small business confidence tumbled into negative territory last quarter, with a deepening of our late payment crisis eating away at optimism.”
“At the same time, availability of the right staff is increasingly holding firms back, hampering their ability to reach their potential. Today’s labour market stats show record numbers of vacancies, demonstrating the problems that the small firms which employ the majority of the private sector workforce face in finding suitable staff.”
“The tax rises coming in April could prove the final straw for many. The Government’s decision to increase National Insurance – a tax on jobs – looks increasingly indefensible when a record high number of small firms are already reporting cost increases across the board, driven by energy bills, rising input costs and staff costs. This tax hits businesses whether they make a profit, break even, or suffer a loss.”
“The Government must seize the opportunity to make the forthcoming Spring Statement as small business-friendly as it can, rowing back on its damaging tax hikes and committing to helping smaller firms make it through continuing turbulence. It should also take action on late payment, a perennial business-killer, by making big corporations appoint directors who are directly responsible for any breaches of fair payment terms, and by ensuring companies whose payment practices fall short face real consequences.”