Credit, Collections & Insolvency News
Latest figures from the Insolvency Service have shown that the number of business insolvencies in England & Wales increased by 16% in September when compared to the same month in the previous year (1,453 in September 2021), and 11% higher than the number registered three years previously (pre-pandemic; 1,508 in September 2019).
In September 2022 there were 1,379 Creditors’ Voluntary Liquidations (CVLs), 4% higher than in September 2021 and 25% higher than September 2019. Numbers for other types of company insolvencies, such as compulsory liquidations, remained lower than before the coronavirus (COVID-19) pandemic, although there were over 6 times as many compulsory liquidations in September 2022 compared to September 2021.
Of the 1,679 registered busienss insolvencies in September 2022 there were 1,379 CVLs, which is 4% higher than in September 2021 and 25% higher than in September 2019.
204 were compulsory liquidations, which is 538% (6.4 times) higher than September 2021, but 10% lower than September 2019, 11 were CVAs, which is 8% lower than September 2021 and 50% lower than September 2019.
There were 85 administrations, which is 5% higher than September 2021 but 47% lower than September 2019; and there were no receivership appointments
Christina Fitzgerald, President of R3, said “The corporate insolvency figures published today provide a clear insight into insolvencies before, during, and after the pandemic.”
“The monthly fall in corporate insolvencies is due to a drop in Creditors’ Voluntary Liquidations, while the year-on-year increase has mainly been caused by a rise in Compulsory Liquidations, which is likely to be due to the end of legislation around winding-up petitions.”
“The increase in corporate insolvencies between September 2022 and September 2019, on the other hand, is due to a significant increase in the number of Creditors’ Voluntary Liquidations.”
“This is likely to be due to the triple whammy of the withdrawal of Covid support, the economic turbulence, and the challenging business climate resulting in directors feeling that they are unable to continue and choosing to close their businesses before that choice is taken away from them.”
“Businesses have been operating against a backdrop of real uncertainty in recent weeks and months. A volatile pound, a decline in consumer confidence and lower household spending have led to weaker economic growth, and it seems likely that these conditions will get worse before they get better.”
“With living costs rising, both business owners and employees are under significant financial strain as rising costs have meant rising salary demands and increasing pressure on margins, which some businesses haven’t, unfortunately, been able to meet.”
“Sky-rocketing energy bills are also a major challenge. While the recently announced emergency support package will go some way towards mitigating these concerns, it may not provide enough of a safety net.”
Mark Supperstone, Managing Partner at ReSolve, attributes the continued rise in insolvencies to the sustained increase in pressure on businesses from a range of factors, including weaker consumer confidence, more aggressive tactics from creditors (as evidenced by the recent jump in winding up petitions issued by HMRC) and unrelenting cost pressures.
“This is an incredibly uncertain time for businesses and I fear that we haven’t reached the nadir yet. Consumers are yet to feel the full impact of rising energy prices and when they do this will almost certainly have an impact on consumer spending. This is exacerbated by the worry we may be entering a recession, which will undoubtedly make PE funds reconsider how much to invest in SME opportunities and lenders will seek to recoup their debts at a more aggressive pace.”
“Companies should make sure they are planning now to mitigate these headwinds so that hopefully these insolvency statistics don’t continue to worsen over the next few months. These are challenging times but I believe that well-run companies will survive to enjoy brighter days ahead.’’
