Business insolvencies increase by 5.5%

Latest figures from the Insolvency Service have shown that the number of business insolvencies in England & Wales increased by 5.5% in August 2022 to a total of 1,933 compared to July’s total of 1,832, and increased by 43.4% compared to August 2021’s figure of 1,348.  August 2021’s business insolvency figures were also 41.6% higher than August 2019’s figures of 1,365.

The number of registered company insolvencies in August 2022 was 43% higher than in the same month in the previous year (1,348 in August 2021) and 42% higher than the number registered three years previously (pre-pandemic; 1,365 in August 2019).

Of the 1,933 registered company insolvencies in August 2022 there were 1,662 CVLs, which is 33% higher than in August 2021 and 73% higher than in August 2019. 142 were compulsory liquidations, which is 274% (3.7 times) higher than August 2021, but 27% lower than August 2019. 13 were CVAs, which is 550% higher (6 and half times higher) than August 2021 but 57% lower than August 2019. There were 116 administrations, which is 111% (2.1 times) higher than August 2021 but 34% lower than August 2019 and there were no receivership appointments.

Commenting on the figures Christina Fitzgerald, President of R3 said “The monthly increase in corporate insolvencies – to the third highest set of monthly statistics since January 2019 – has mainly been caused by an increase in the number of Creditors’ Voluntary Liquidations.”

“This suggests that directors remain concerned about their ability to continue to trade in the current climate, and are choosing to close their businesses before that choice is taken away from them.”

“These figures will be a sobering reminder to government of the scale of the challenge facing the UK economy as we head into the winter months, and reflect the continued toll the sustained economic turbulence is taking on businesses in England and Wales.”

“Companies are facing enormous running cost hikes just as household spending is facing its biggest squeeze in several decades which delivers yet another blow to business owners who were hoping to bounce back to normal trading levels post-pandemic.”

“Many directors and managers are worried about the rise in prices and energy costs and the effect these will have on their margins and profits, and this is set to continue to be a concern.”

Whilst Mark Supperstone, Managing Partner at ReSolve attributes the spike in insolvencies in August as a symptom of the removal of government support measures (such as the winding-up petitions and evictions moratoriums)by the Johnson administration, which he says, is compounded by the huge jump in energy prices and will have a crippling effect on businesses heading into winter.

Supperstone said “The number of registered company insolvencies in August 2022 was 43% higher than the same time a year ago, driven in part by a higher number of CVLs. Worryingly, the number of CVLs has increased over the past couple of months (after a decline at the start of the year), marking a significant leap compared to the 2019 figures which reflects the perfect storm business now faces: the effects of the removal of Government support during the Covid pandemic, coupled with unprecedented inflation and an untenable spike in energy prices, which has had a chilling effect on consumer confidence whilst also swelling costs for businesses. It is worth mentioning that administrations are still down on pre-pandemic levels which suggests that businesses may be closing rather than going through a formal rescue procedure.:

“It remains to be seen whether this level of insolvencies continues to fall or worsens as businesses lose the battle against higher operating costs. Much depends on the outlook for inflation, in particular, energy costs, and the effects of that on business and consumer confidence. We are living in a time of unprecedented uncertainty.”