Credit, Collections & Insolvency News
Annual business insolvency figures statistics for England and Wales from the Insolvency Service have indicated that there were 14,048 underlying corporate insolvencies in 2021, an increase of 11.2% from 2020’s figure of 12,634, but a fall of 18.2% on 2019’s figure (17,166).
The increase compared to 2020 was driven by the highest annual number of Creditors’ Voluntary Liquidations (CVLs) since 2009. However, the number of CVLs in 2021 was only slightly higher than in 2019 and was consistent with the increasing trend in CVL numbers before the coronavirus (COVID-19) pandemic.
All other types of company insolvencies were lower than both 2020 and pre-pandemic levels. The annual number of compulsory liquidations was the lowest since the start of the series in 1960.
Increases in insolvencies were seen across most industries in 2021 compared to 2020. Several sectors showed increases above the overall annual increase of 11%, including Professional, scientific and technical activities (up 35%) and Construction (up 25%).
The three industries (in accordance with SIC 2007) that experienced the highest number of insolvencies in 2021 were:
The construction industry tends to have the highest quarterly number of insolvencies of any industrial grouping.
Increases in insolvencies were seen across most industries in 2021 compared to 2020, as shown in Figure 3. The only large sector to show a decrease in insolvency numbers was the Manufacturing sector (down 13%). Several sectors showed increases above the overall annual increase of 11%, including Professional, scientific and technical activities (up 35%) and Construction (up 25%). Electricity, gas, steam and air conditioning supply sector insolvencies increased by 75%, although this sector represented less than 1% of all company insolvencies.
Commenting on the figures, Colin Haig, President of insolvency and restructuring trade body R3 and Head of Restructuring at Azets said “The increase in annual corporate insolvencies has been driven by a rise in Creditor’s Voluntary Liquidations (CVLs), which reached levels not seen since 2009. The increase this year – and the surge in CVLs in the final quarter of 2021 – suggests that many directors are opting to close their businesses as they lack confidence in their trading prospects in the current climate. And while insolvencies still haven’t reached pre-pandemic levels, this is unlikely to remain the case for long.
“The increase also reflects the torrid 12 months businesses have faced as they attempt to carry on trading in the second year of a pandemic amidst uncertainty, change and challenge. Businesses have had to trade through lockdowns and restrictions, increases in energy prices, and supply chain issues. And they’ve done so in an economy that only returned to where it was before the pandemic in November – just weeks before the Government’s Omicron measures were introduced.”
“Given the current climate, we urge company directors to be aware of the signs of financial distress and seek help if any present themselves. Our message is a simple one: if you’re having problems paying staff or suppliers, your stock levels are piling up, or you’re worried about paying your rent or your tax debts, or your business’ finances or future, seek advice as soon as possible.”
“Talking about your concerns about your business is hard, but the sooner you do, the more options you have to turn it around, and the more time you have to take a decision about your next steps. Most R3 members will offer a free hour’s consultation to concerned directors so they can understand the issues their business faces, and outline the potential options for improving its situation.”
Beverley Wakefield, co-founder of Derby-based Vibrant Accountancy “The slow increase in company insolvencies last year could soon become a sprint. We’ve had two years of the Government propping up many businesses with cheap loans and furlough, and HMRC being fairly cooperative regarding overdue debts. Most of the support has now gone and the Revenue will soon stop playing Mr Nice. Businesses are now having to stand up on their own two feet and many are already starting to wobble. A growing number of businesses are tied up in knots with debt, especially those who didn’t take control of their cashflow and overheads during the pandemic. I expect the relatively benign level of company insolvencies to spring back with a vengeance if businesses aren’t supported enough in 2022. We are now entering the business end of the pandemic and many businesses, without further support and rigorous oversight of costs, will not survive.”
| Year | Total company insolvencies | Compulsory liquidations | CVLs | Administrations | CVAs | Receiverships |
|---|---|---|---|---|---|---|
| 2017 | 14,568 | 2,746 | 10,197 | 1,316 | 307 | 2 |
| 2018 | 16,049 | 3,087 | 11,143 | 1,463 | 355 | 1 |
| 2019 | 17,166 | 2,943 | 12,058 | 1,813 | 351 | 1 |
| 2020 | 12,634 | 1,353 | 9,491 | 1,527 | 260 | 3 |
| 2021 | 14,048 | 475 | 12,661 | 796 | 115 | 1 |
| Percentage change, 2021 compared with: | ||||||
| 2020 | 11% | -65% | 33% | -48% | -56% | [z] |
| 2019 | -18% | -84% | 5% | -56% | -67% | [z] |
*z indicates percentage changes are not applicable as these have not been calculated where both numbers are less than five.
