Statistics released by The Insolvency Service last week show that the number of company insolvencies has soared in Q2 of 2022. Between 1 April and 30 June 2022 there were 5,629 registered company insolvencies. Of these, 4,908 were creditors’ voluntary liquidations (CVLs), 368 were compulsory liquidations, 320 were administrations, 32 were company voluntary arrangements (CVAs) and there was one receivership appointment.
This is the highest figure since 2012 after the financial crash with the number of company insolvencies 81% higher than in Q2 2021 and 13% higher than Q1 2022.
This means that 1 in every 228 active companies entered into liquidation between 1 July 2021 and 30 June 2022. At a rate of 43.9 per 10,000 active companies, this was an increase from the 26.1 per 10,000 active companies that entered liquidation in the 12 months ending 30 June 2021.
The worst affected sectors were construction (19% of cases); wholesale and retail trade, and repair of motor vehicles and motorcycles (13%); and accommodation and food service activities (12%).
Why are insolvencies so high?
We’ve been predicting this surge in business insolvency, as the financial impact of the pandemic on businesses continues to unravel so it’s come as no surprise.
From the start of the Covid-19 pandemic until mid-2021, numbers of company insolvencies were low when compared with pre-pandemic levels. Compulsory liquidation, administration and CVA numbers remained lower throughout 2021 and were still lower than pre-pandemic levels in Q2 2022. This was due to government fiscal measures that were put in place to support businesses and individuals.
CVLs have now peaked to their highest recorded figure of 4,908, indicating that many directors are choosing to close their businesses as they lack confidence in their future trading prospects in the current climate.
The steady rise in compulsory liquidations since the start of 2022 shows that creditors are now making use of their power to issue winding-up petitions to try and claw back monies they are owed.
Our thoughts
Many businesses still have an overload of debt in the aftermath of covid including BBLs and HMRC arrears and this is coupled with low business confidence in the aftermath of the pandemic.
Inflation is tipped to reach 13.3%, interest rates are rising, and the price of energy is eye-watering. All these factors leave businesses very exposed and sadly we do expect to continue to see high levels of company insolvencies.
Company directors are urged to seek advice from a qualified professional as soon as they have any concerns about financial distress. The earlier that advice is sought then the greater number of options there will be for the business.
It’s essential for directors to get help as early as possible to increase the likelihood of a rescue before it is too late.
If you are concerned about the future of your business get in touch with us now. Our experienced team can work with you to look at what options are available to see your business through the rest of the year and beyond.
Disclaimer
The information was correct at time of publishing but may now be out of date.
