The number of business insolvencies has more than doubled year on year with the number of administrations having reached a 15-month high, the latest figures show.
According to the insolvency and restructuring trade body R3, it shows the lifting of restrictions has not been the ‘shot in the arm’ that businesses had hoped for.
The Insolvency Service figures show there were 1,515 corporate insolvencies in February in England and Wales – 3% down on the previous month but an increase of 121% on February 2021. The figure was also 13% higher than in February 2020 before the start of the pandemic.
Allan Cadman, who is North West chair of R3 and a partner at insolvency firm Poppleton & Appleby, says: “This increase in administrations suggests that there are a number of insolvent businesses which have some prospect for rescue, given this is one of the main 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 a month-on month-decline, the figures show corporate insolvency numbers in February 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.”
