Business Insolvencies increase by 4.2%

Latest figures from the Insolvency Service have shown that the number of business insolvencies in England & Wales increased by 4.2% in November 2022 to a total of 2,029 compared to October’s total of 1,948, and increased by 21.1% compared to November 2021’s figure of 1,676, and by 34.8% compared to November 2019’s total of 1,505.

The 2,029 registered business nsolvencies in November 2022 consisted of1,595 CVLs, which is 5% higher than in November 2021 and 50% higher than in November 2019. 290 were compulsory liquidations, which is 437% (5.4 times) higher than November 2021 and 7% higher than November 2019. 10 were CVAs, which is the same as November 2021 but 52% lower than November 2019.

There were 134 administrations, which is 44% higher than November 2021 but 11% lower than November 2019 and there were no receivership appointments.

There were 290 compulsory liquidations in November 2022, more than five times as many as in November 2021 and 7% higher than in November 2019. Numbers of compulsory liquidations have increased from historical lows seen during the coronavirus (COVID-19) pandemic, partly as a result of an increase in winding-up petitions presented by HMRC. In October and November the numbers of compulsory liquidations were higher than the pre-pandemic comparison months, due to 95 petitions from a single bank.

In November 2022 there were 1,595 Creditors’ Voluntary Liquidations (CVLs), 5% higher than in November 2021 and 50% higher than November 2019. Numbers of administrations and Company Voluntary Arrangements (CVAs) remained lower than before the pandemic.

Commenting on the figures Christina Fitzgerald, President of R3 said  “The rise in corporate insolvency numbers has been mainly driven by an increase in Compulsory Liquidations, while Creditor Voluntary Liquidations (CVLS) and Administration numbers have also increased. Increases in CVLs and Compulsory Liquidations are the key drivers of the increase from this time last year and from three years ago.”

“What we’re seeing here is a perfect storm of creditors pursuing unpaid debts and directors choosing to close down their businesses – either before this choice is taken away from them or because they have simply run out of road.”

“An increasing number of businesses are buckling under the strain of more than two and half years of economic turmoil. Companies have been battered by the pandemic, rising costs, reduced spending and increasing inflation, and a growing number are now turning to an insolvency process to resolve their financial distress.”

“For many businesses, the Christmas and post-Christmas period is a critical part of their year and the time when a large percentage their revenue is generated. However, given how stretched people’s finances are this year, it remains to be seen whether this will be a happy Christmas or a final one for these firms.”

Gareth Harris, partner at RSM UK Restructuring Advisory, said “Whilst these figures continue the recent trend of a high level of “shut down” insolvencies via a CVL process, what is equally clear is that other stakeholders are also losing patience or ability to wait for overdue payments.”

“The increase in HMRC compulsory winding ups is a timely reminder that they won’t wait forever.  It now feels inevitable that the current economic position will drive this wave of insolvencies further –  long into 2023 – and those who can see issues coming need to act now to avoid any terminal process.”

The increase in the number of compulsory liquidations has again been partly put down to the rise in HMRC winding-up petitions which was also noted by Mark Supperstone, Managing Partner at ReSolve. Compulsory liquidations over the past two months have also been higher than pre-pandemic comparison months due to 95 petitions from a single bank.

Supperstone said “As many predicted, insolvencies have continued to rise again this month, reflecting the increasingly tough macro climate that businesses are facing. With cost pressures mounting, diminishing consumer confidence and lack of government support coupled with the stark rise in HMRC winding-up petitions, these figures should come as no surprise. At ReSolve, we envisage these conditions persisting into the New Year and our advice to struggling SMEs is to plan now and seek professional advice, if necessary, in order to give your business the best tools for survival.”