Latest figures from the Insolvency Service have indicated that the number of business insolvencies in England & Wales more than doubled year-on-year last month, with 1,515 business insolvencies in February.
The increase was 121.2% compared to February 2021’s figure of 685. They were also 12.6% higher than in February 2020 (1,346).
The increase in company insolvencies was driven by an increase in the number of CVLs (Creditors’ Voluntary Liquidation), which were 40% higher than pre-pandemic levels. Other insolvency types were lower than pre-pandemic levels, although compulsory liquidation numbers were more than double and administrations were almost double (95% higher) the number in February 2021.
Of the 1,515 registered company insolvencies in February 2022 there were 1,329 CVLs, which is 125% (2.25 times) higher than in February 2021 and 40% higher than in February 2020;
74 were compulsory liquidations, which is 124% (2.25 times) higher than February 2021, but 68% lower than February 2020, three were CVAs, which is 50% lower than February 2021 and 84% lower than February 2020.
There were 109 administrations, which is 95% higher than February 2021 but 26% lower than February 2020; and no receivership appointments.
Between 26th June 2020 and 28th February 2022, 33 moratoriums were obtained and 10 companies had a restructuring plan registered at Companies House.
Commenting on the figures Christina Fitzgerald, Vice President of insolvency and restructuring trade body R3, said “The monthly fall in corporate insolvencies is being driven by a reduction in all types of corporate insolvency process, with the exception of administrations, whose numbers increased to a 15 month high.”
“This increase suggests that there are a number of insolvent businesses which have some prospect for rescue, given this is one of the main statutory purposes of the administration process. Wherever possible the insolvency profession will work to secure the rescue of businesses in administration to help ensure better outcomes for the business, its staff and its creditors.”
“However, despite the month-on month-decline, the figures released today show corporate insolvency numbers were higher than this time last year and the year before – and that levels of corporate insolvency have remained at pre-pandemic levels.:
“Sadly, the ending of the peak of the pandemic and the lifting of the final set of restrictions hasn’t led to the shot in the arm the business community had hoped for. Although the economy grew in January and firms benefited from restrictions ending in February, it took time for footfall to increase – and will take a while before anything resembling normality returns.”
“Consumer spending has declined and consumer confidence is low as people worry about the economy and their own financial position, with inflation now a real problem for firms and individuals alike. This situation is unlikely to improve any time soon given the impact the war in Ukraine will have on energy costs.”
“In addition to this, the restrictions on using winding-up petitions are coming to an end later this month – something which could see an increase in creditors turning to legal action to recover unpaid debts.”
“Now is the time for directors to be alert to the signs of financial distress and to take action if they show themselves. We know conversations about a business’ financial position are some of the hardest to have, but speaking up about your concerns at an early stage typically leads to a better outcome than if you’d waited until the problem worsened.”
Marcus Wright, MD of Bolton Business Finance, said “It’s not surprising we are seeing an increase in the number of company insolvencies, now that most of the Government’s Covid support has ended. Also, many of the Government-backed loans like Bounce Back and CBILS came without payments for the first 12 months, creating an artificially strong economy.”
“It is sad to see businesses going under but many more company insolvencies are likely during 2022 given the numerous challenges facing the economy. Businesses that are not profitable or able to compete will simply not be able to survive. Insolvency practitioners are likely to be very busy during the next year or two.”