Credit, Collections & Insolvency News
Latest quarterly figures from the Insolvency Service have shown that the number of business insolvencies in England & Wales increased by 30%.
After seasonal adjustment, the number of business insolvencies in Quarter 4 (Q4) 2022 was 7% higher than in Q3 2022 and 30% higher than in Q4 2021. The number of CVLs remained close to the highest quarterly level since the start of the series in 1960 (Q2 2022). The number of compulsory liquidations also increased to the highest quarterly number since the start of the coronavirus (Covid-19) pandemic, partly as a result of an increase in winding-up petitions presented by HMRC and due to a high number of petitions from a single bank.
The figures between 1st October and 31st December 2022 in Q4 2022 show that there were 5,995 (seasonally adjusted) registered business insolvencies, comprising 4,891 creditors’ voluntary liquidations (CVLs), 720 compulsory liquidations, 359 administrations and 25 company voluntary arrangements (CVAs). There were no receivership appointments.
In Q4 2022, CVLs accounted for 82% of all company insolvencies. The number of CVLs increased by 2% from Q3 2022, and was 18% higher than during the same quarter last year, after seasonal adjustment. The number of CVLs have stayed approximately constant over the past three quarters at a record-high level. The number of CVAs was 14% lower in Q4 2022 than in Q3 2022, and 24% lower than Q4 2021.
| Total company insolvencies | Compulsory liquidations | CVLs | Administrations | CVAs | Receiverships | |
|---|---|---|---|---|---|---|
| 2021Q4 | 4,617 | 158 | 4,159 | 267 | 33 | 0 |
| 2022Q1 | 4,838 | 340 | 4,199 | 274 | 25 | 0 |
| 2022Q2 | 5,655 | 382 | 4,917 | 323 | 32 | 1 |
| 2022Q3 | 5,621 | 503 | 4,815 | 274 | 29 | 0 |
| 2022Q4 | 5,995 | 720 | 4,891 | 359 | 25 | 0 |
| Percentage change, latest quarter (Q4 2022) compared with: | ||||||
| vs 2022Q3 | 7% | 43% | 2% | 31% | -14% | [z] |
| vs 2021Q4 | 30% | 356% | 18% | 34% | -24% | [z] |
Commenting on the figures Nick O’Reilly, Director of Restructuring and Recovery at MHA said “With the cost of living crisis and high interest rates continuing to bite, it’s likely 2023 will see the highest number of business insolvencies since the financial crisis of 2008 and the highest number of small Creditor Voluntary Liquidations (CVLS) since records began to be kept in 1960.”
“Despite business administrations dropping in the month of December 2022, it would be foolhardy to expect this to be anything other than a seasonal anomaly. I would fully expect the first quarter of 2023 to show increases across the board, with bounce back loan defaults and unpalatable interest rates continuing to drive CVLs as well as other corporate insolvency processes.”
“With the government focused on repaying the financial outlay provided to businesses during the pandemic, there seems little chance of new support measures being introduced to help stem the tide. This April’s increase in corporation tax from 19% to 25% will be seen by some as poor timing as many businesses stare into the abyss but the government states that it has no more room to defer the increase.”
Samantha Keen, UK Turnaround and Restructuring Strategy Partner at EY-Parthenon and President of the Insolvency Practitioners Association (IPA) said “The 30% year-on-year increase in company insolvencies in Q4 2022 illustrates the challenging trading conditions currently facing many UK businesses. We are now starting to see a significant rise in the number of compulsory liquidations, which rose to 720 in Q4 2022, more than four-times higher than the same period in 2021.”
“Supply chain pressures, rising inflation and high energy prices have created a ‘trilemma’ of headwinds which many management teams will be experiencing simultaneously for the first time. This stress is now deepening and spreading to all sectors of the economy as falling confidence affects investment decisions, contract renewals and access to credit.”
“EY-Parthenon’s latest Profit Warnings report, released yesterday, found the number of warnings from UK-listed companies increased 50% year-on-year, with record levels of warnings citing rising costs. Weaker consumer confidence, which affected many businesses in the lead up to traditionally the busiest time of the year for consumer-facing companies, also accounted for 20% of warnings in Q4 2022.”
“It’s vital that businesses develop operational and financial resilience to face the year ahead which is likely to be characterised by lower growth, tighter capital and market volatility. The latest analysis from the EY ITEM Club Winter Forecast warns the recession is likely to be deeper than previously expected. Robust forecasting and scenario planning will ensure management teams are fully equipped to adapt to conditions in their market, safeguarding their long-term survival.”
Gareth Harris, Partner at RSM UK Restructuring Advisory, said “These Q4 insolvency numbers have confirmed that the “excess insolvencies” which have been put off by the Government Covid support packages are now in free flow. We expect these high liquidation numbers to continue for a couple more quarters before slowly tailing off as the recession softens.”
“But, the next 6 months may be the toughest for UK business since the early 1990s as almost all economic indicators paint a gloomy picture and survival will represent success for many. This will however create opportunity for those strong businesses who may be able to capitalise if they can move quickly.”