Credit, Collections & Insolvency News
Total business insolvencies in England and Wales in the second quarter of 2022 hit their highest quarterly level since 2009 at 5,629.
According to latest ONS data, although insolvencies decreased in 2020 thanks to government support packages, Creditors’ Voluntary Liquidations (CVLs) have hit a new high.
CVLs accounted for 89% of all company insolvencies in England and Wales between Quarter 1 2021 and Quarter 2 2022. CVLs are the most common company insolvency in England and Wales and are typically used by small businesses going insolvent. A CVL is a type of insolvency whereby shareholders of a company pass a resolution that the company be wound up voluntarily. While CVL numbers are now higher than pre-pandemic levels, numbers for other insolvency procedures, such as compulsory liquidations for companies and bankruptcies for individuals, remain lower.
Business insolvencies in England and Wales have been rising since 2021. Insolvencies decreased in 2020, when government support to businesses was in place during the coronavirus pandemic; average quarterly insolvencies since Quarter 1 2020 are slightly lower than the 2015 to 2019 average.
More than one in ten businesses reported a moderate-to-severe risk of insolvency in August 2022. During the same period, 22% of businesses said energy prices were their main concern, which is an increase from 15% in late February 2022; in firms with 10 to 49 employees, the figure was 30%.
Construction, manufacturing, accommodation and food service sectors, and wholesale and retail trade industries together accounted for more than half of total business insolvencies in the first half of 2022.
Business insolvencies in England and Wales averaged 3,850 per quarter between 2015 and 2019 but fell to an average of 3,731 between Quarter 1 2020 and Quarter 2 2022. This was a period that showed strong volatility, with low numbers of insolvencies recorded in 2020 likely to have been partly driven by government measures put in place to support businesses during this time.
Commenting on the figures, Ed Rimmer, CEO of SME finance provider, Time Finance said “Not only are insolvency figures rising to their highest levels in over a decade, but viable firms are bearing the brunt of rising energy and labour costs, slower economic growth and rising inflation. Our recent survey found that 80% of business owners feel the greatest financial pressure from rising costs and 50% believe tailored financial support would help them to relieve that pressure. With more and more companies forced into financial strife, insolvencies will continue to rise beyond the natural business cycle and this will create further issues for our economic recovery and growth.”
