Credit, Collections & Insolvency News
Annual quarterly figures from the Insolvency Service have shown that there were 22,109 business insolvencies in England & Wales in 2022. This was an increase of 57.3% from 2021’s figure of 14,059, an increase of 75% on 2020’s figure of 12,632, and an increase of 28.8% on 2019’s figure (17,164).
One in 202 active companies (at a rate of 49.5 per 10,000 active companies) entered insolvent liquidation in 2022. This was an increase from the 32.9 per 10,000 active companies that entered liquidation in 2021, and was higher than the 41.9 per 10,000 in 2019 (before the coronavirus (Covid-19) pandemic).
The increase compared to 2021 was driven by the highest annual number of Creditors’ Voluntary Liquidations (CVLs) since the start of the series in 1960. The number of CVLs in 2022 was approximately 21% higher than if the pre-pandemic trend had continued.
In 2022, CVLs increased by 49% from 2021 to the highest annual number since the start of the time series in 1960. They accounted for 85% of all company insolvencies. CVLs had been increasing at approximately 10% per year pre-pandemic (between 2017 and 2019), followed by a decrease at the start of the pandemic (2020), then a subsequent increase to 56% above pre-pandemic (2019) numbers in 2022. The number of CVLs in 2022 was approximately 21% higher than if the pre-pandemic trend had continued.
The liquidation rate in 2022 was the highest liquidation rate since Q3 2015, but was lower than the recessionary peak of 94.7 per 10,000 in 2009. The number of compulsory liquidations in 2022 was nearly four times higher than the record low number in 2021 (296% higher), but 34% lower than in 2019 (pre-pandemic levels). Temporary insolvency measures in response to the coronavirus pandemic, including restrictions on the use of statutory demands and certain winding-up petitions (leading to compulsory liquidations) ended on 31 March 2022.
The number of administrations in 2022 was 55% higher than in 2021, but 32% lower than in 2019.
The number of CVAs in 2022 was 3% lower than in 2021, and 68% lower than in 2019. The annual number was the lowest since 1993.
The five industries (in accordance with SIC 2007) that experienced the highest number of insolvencies in 2022 were:
Christina Fitzgerald, President of R3, the insolvency and restructuring trade body and Partner at Edwin Coe LLP said “2022 was the year the insolvency dam burst. After two years of being supressed by Government support programmes, corporate insolvency numbers hit a 13-year high last year. This was mainly due to Creditors’ Voluntary Liquidations reaching their highest level in 62 years as more and more directors turned to this process to close down their businesses.”
“After nearly three years of trading through a pandemic, and in the face of the end of Government support, rising costs and a cost-of-living crisis, many directors simply ran out of road this year and chose to close their businesses before the choice was taken away from them.”
“Alongside this, the end of the Government’s temporary legislation on winding-up orders has left creditors free to pursue unpaid debts, which is why Compulsory Liquidation numbers are at their highest in three years.”
“With the entire supply chain under pressure from increased costs, the flexibility we saw from creditors during and in the aftermath of the pandemic to those who owed them money has disappeared, and many are now taking action to recover the debts they are owed in an attempt to balance their own books.”
“Inflation is still high, supply chains are still squeezed, and people are still worried about the cost of living, so it’s likely we’ll see insolvencies continue to rise this year unless the trading climate takes a drastic turn for the better.”
“We urge directors to be aware of the signs their business is financially distressed and act as soon as they see them. Rising stock, problems paying staff or suppliers and cashflow issues are all signs a business is struggling, and seeking advice as soon as they show themselves gives directors more options, more time to make a decision and a better outcome than if they’d waited till the situation became more severe.”
