Business insolvencies increase by 38%

Latest figures from the Insolvency Service have shown that the number of business insolvencies in England & Wales were 38% higher than in the same month in the previous year (1,410 in October 2021), and 32% higher than the number registered three years previously (pre-pandemic; 1,477 in October 2019).

The number of registered company insolvencies in October 2022 was 1,948. There were 1,594 CVLs, which is 28% higher than in October 2021 and 53% higher than in October 2019, 242 were compulsory liquidations, which is 357% (4.6 times) higher than October 2021 and 2% higher than October 2019. Five were CVAs, which is 69% lower than October 2021 and 86% lower than October 2019.

The increase in company insolvencies compared to October 2021 was driven by an increase in the number of compulsory liquidations and CVLs. The increase in compulsory liquidations is partly as a result of an increase in winding-up petitions presented by HMRC. This is the first month in which the number of compulsory liquidations has been similar to the pre-pandemic comparison month. This was partly caused by a large number of petitions from a single bank, which accounted for 45 of the compulsory liquidations in this month.

There were 107 administrations, which is 13% higher than October 2021 but 33% lower than October 2019.

The 242 compulsory liquidations in October 2022, more than four times as many as in October 2021 and 2% higher than in October 2019. 

In October 2022 there were 1,594 Creditors’ Voluntary Liquidations (CVLs), 28% higher than in October 2021 and 53% higher than October 2019. 

Commenting on the figures, Nicky Fisher, Vice President of R3 said “The monthly rise in corporate insolvencies is driven by an increase in Compulsory Liquidations, Creditors’ Voluntary Liquidations (CVLs), and Administrations.”

“A series of economic issues, the end of temporary insolvency legislation, and a lack of a post-COVID bounce have hit all parts of the economy and the supply chain hard, and have resulted in more directors choosing to close their businesses and more creditors calling in debts as a means of balancing their own books.”

“The current outlook is tough for many businesses as costs rise and consumer confidence remains low. Worries about the price of food and fuel as winter approaches means many people are saving their money ahead of their bills coming in and simply aren’t spending – and a range of businesses, including household names, are struggling as a result.”

“On top of this, business owners are worried about the economy, the prospect of an imminent and prolonged recession, and where they’ll find the money to meet employees’ requests for increased pay as their own costs of living increase.”

“The jury is still out on whether the Christmas trading period, which will include an unseasonal football World Cup, will lead to the traditional boom many businesses are hoping for or whether disappointing sales over the festive period will lead to businesses turning to an insolvency process to resolve their financial issues.”

Gareth Harris, restructuring advisory partner at RSM UK, said “This is the first time since the pandemic that we have seen a really noticeable increase in compulsory liquidations driven by two of the key creditors.  It is clear that all the talk of a forthcoming recession means stakeholders who are owed money are becoming less willing and able to tolerate delays in payment and are now moving more rapidly to enforcement action. For any director faced with early notification of, or the threat of, a potential winding up this ought to be a wake up call.  The threat can become a reality relatively quickly and kicking the can down the road may no longer be an option.”

Mark Supperstone, Managing Partner at ReSolve said  “There has been another significant jump in company insolvencies in October 2022 compared to the same period last year, reflecting the increasingly challenging economic conditions and the acute lack of government support available. This continued rise is clearly linked to mounting cost pressures businesses across the country are facing compounded by weakening consumer confidence and the worrying increase in winding-up petitions issued by HMRC.”