Business insolvencies double

Latest figures from the Insolvency Service have shown that the number of business insolvencies in England & Wales decreased by 6% in April 2022 to a total of 1,991 compared to March’s total of 2,119, and increased by 115.2% compared to April 2021’s figure of 925.

Business insolvencies were more than double the number registered in the same month in the previous year (925 in April 2021), and 39% higher than the number registered three years previously (pre-pandemic; 1,429 in April 2019).

In April 2022 there were 1,777 Creditors’ Voluntary Liquidations (CVLs), more than double the number in April 2021 and 74% higher than April 2019. Numbers for other types of company insolvencies, such as compulsory liquidations, remained lower than before the pandemic, although there were three times as many compulsory liquidations in April 2022 compared to April 2021, and the number of administrations was 51% higher than a year ago.

The increase in company insolvencies was driven by an increase in the number of CVLs, which were 74% higher than in April 2019. Other insolvency types were lower than in April 2019, although compulsory liquidation numbers were three times higher and administrations were 51% higher than the number in April 2021.

Of the 1,991 registered company insolvencies 1,777 CVLs. 91 were compulsory liquidations, which is 203% (3 times) higher than April 2021, but 61% lower than April 2019. 10 were CVAs, which is double the amount in April 2021 but 62% lower than April 2019.

There were 113 administrations, which is 51% higher than April 2021 but 22% lower than April 2019 and there were no receivership appointments.

Commenting on the figures, Christina Fitzgerald, President of R3 said “The monthly fall in corporate insolvencies has mainly been driven by a reduction in Creditors’ Voluntary Liquidations (CVLs). However, the significant year-on-year rise in corporate insolvencies has been driven by the fact that numbers for this process have more than doubled since April 2021.”

“This highlights the role the Government’s support initiatives played in preventing the economic damage of the pandemic from translating into an increase in corporate insolvencies. It also suggests that large numbers of directors lack confidence in their ability to continue trading in the current climate, and are choosing to close their businesses now rather than being forced to in the future.”

“The figures published today reflect the continued toll the economic turbulence is taking on the business community. The boom many were hoping for when pandemic restrictions ended simply hasn’t happened as the UK has moved from one damaging set of economic stressors to another without any time to draw breath.

“Businesses are trying to trade amidst rising inflation, a contracting economy and consumer confidence at a near historic low – lower than during the peak of the pandemic – due to cost of living concerns. Alongside this, rising fuel and energy costs and demands for increased wages from employees mean that it’s a challenge simply to break even at the moment, especially for those businesses who are still reeling from the pandemic.”

“Our advice to any directors who are worried about their business is to seek advice and to do it as soon as possible. We know how hard it is to admit a business you’ve worked to build is struggling, but having that conversation at an early point is likely to result in a far better outcome than if you’d waited and the problem had spiralled.”

Ed Rimmer, CEO of Bath-based SME finance provider, Time Finance: “If support measures are not put in place soon, the outlook for businesses will undoubtedly worsen. We’re seeing an increasing number of companies facing impacted turnover, unable to compete, reducing personnel, scaling back on investment plans and exiting markets. Sadly, many firms will be forced into insolvency if they’re unable to overcome these challenges. Our clients are already approaching us to seek the support they so urgently need, which is a clear indication of the severity of what is happening in the broader business landscape.”

Mark Supperstone, Managing Partner at ReSolve, says that  the general increase in insolvencies as being partly due to the removal of government support measures (such as the winding-up petitions and evictions moratoriums) and raises concerns regarding the impact the cost of living crisis will have on businesses throughout the latter part of 2022.

“Whilst insolvencies generally are up on pre-pandemic levels, administration levels are relatively low (22% lower than pre-pandemic levels). There are several reasons for this; an important one is the fact that there is still quite a lot of cash available for solid businesses that happen to be in financial distress. Another one is the fact that creditors have been supportive and willing to work with distressed businesses to help restructure their balance sheets and put them on more realistic payment plans, thereby helping them survive.”