The number of business insolvencies has more than doubled year on year with the increase driven by a rise in compulsory liquidations, the latest figures show.
According to the insolvency and restructuring trade body R3, it suggests that creditors are now starting to pursue companies for unpaid debts following the lifting of restrictions on issuing formal winding up proceedings.
The latest insolvency figures show there were 1,560 corporate insolvencies in January – up by 5% on the previous month and by 106% on January 2021. The figure was also 3% higher than in January 2020 before the start of the pandemic.
Allan Cadman, who is North West chair of R3, says: “The increase in corporate insolvencies is being driven by a rise in compulsory liquidations, which were 131% higher than this time last year. This suggests that creditors are now starting to take action over unpaid debt, having been legally prevented from doing so since the start of the pandemic.”
Meanwhile the number of Creditors’ Voluntary Liquidations (CVLs) – a procedure where directors choose to shut down their company voluntarily – have remained similar to December and much higher than pre-pandemic levels.
Allan Cadman adds: “The number of CVLs suggests that many company directors are continuing to choose to close their businesses rather than attempting to carry on trading in the current climate.
“The figures highlight the toll the current business climate is taking on firms in England and Wales. Over the last two months, businesses have had to trade through a perfect storm of issues including new COVID measures, a slowdown in consumer spending, and rising inflation, with steep increases in energy prices a particular pinch-point. All of these will have taken a toll.
“After nearly two years of trading through a pandemic, these factors may increasingly become too difficult for many directors to deal with. Against a backdrop of continued pandemic-related uncertainty, there is likely to be a significant number of directors who will be increasingly doubtful that their business can survive much longer.
“We would urge anyone concerned about their business finances to seek advice about their situation as soon as possible. Many insolvency practitioners will give an hour’s free consultation to businesses in this position, so they can understand more about their situation and outline the options for resolving it.”
