Business insolvencies increase by 79%

20th June 2022

Latest figures from the Insolvency Service have shown that the number of business insolvencies in England & Wales decreased increased by 79.2% compared to May 2021’s figure of 1,014 but dereased by 8.9% in May 2022 to a total of 1,817 compared to April’s total of 1,995.

Of the 1,817 registered company insolvencies in May 2022 there were 1,584 CVLs, which is 70% higher than in May 2021 and 66% higher than in May 2019. 135 were compulsory liquidations, which is 297% (4 times) higher than May 2021, but 50% lower (half the number) than May 2019; 14 were CVAs, which is more than double the amount in May 2021 but 55% lower than May 2019 and there were 84 administrations, which is 95% higher than May 2021 but 12% lower than May 2019 with no receivership appointments.

In May 2022 there were 1,584 Creditors’ Voluntary Liquidations (CVLs), 70% higher than in May 2021 and 66% higher than May 2019. Numbers for other types of company insolvencies, such as compulsory liquidations, remained lower than before the pandemic, although there were four times as many compulsory liquidations in May 2022 compared to May 2021, and the number of administrations was 95% higher than a year ago·     

Commenting on the figures, Christina Fitzgerald, President of R3, the insolvency and restructuring trade body said  “The monthly fall in corporate insolvencies has mainly been driven by a reduction in Creditors’ Voluntary Liquidations. However, numbers for this process and for overall corporate insolvencies are higher than this time last year, the year before it (2020) and in 2019.”

“This suggests that while the current economic challenges are continuing to hit businesses hard and are pushing an increased number into insolvency, insolvency trends are still uneven.”

“In recent months, firms have been buffeted by rising costs, falling consumer confidence and reluctance to spend on anything other than the essentials, which has meant they haven’t made the additional income they need to offset increased expenditure.”

“There simply hasn’t been time to draw breath between the issues caused by the pandemic and those now arising from our current economic challenges, and many businesses who have survived so far are now starting to struggle – and rising interest rates will add extra costs for firms to deal with.”

Mark Supperstone, Managing Partner at ReSolve said “The uptick 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 when inflation is predicted to reach 11%.”

“Whilst insolvencies generally are up on pre-pandemic levels, administration levels remain relatively low in comparison (12% lower than pre-pandemic levels). This may be because there is still fairly easy access to funding for businesses with good prospects, potentially avoiding the need for a formal administration process.  As the inflationary environment continues to bite, however, with economic indicators weakening, it remains to be seen whether this funding will be so easy to raise, or whether many businesses are forced to explore alternative options, leading to more businesses in distress.”