A leading North West insolvency expert has warned that businesses are facing a ‘perfect storm’ as the number of corporate insolvencies reached the second highest level in a decade.
The latest government statistics show that there were 5,595 seasonally adjusted corporate insolvencies in the third quarter of the year in England and Wales – a fall of 1% on the previous quarter but up 40% on the same quarter last year and 28% higher than in the same period in 2019.
The number of Creditors’ Voluntary Liquidations – where directors choose to close their companies voluntarily – was almost the highest since 1960.
Allan Cadman, who is North West chair of the insolvency and restructuring trade body R3, says: ““Two years of economic turbulence are translating into a rise in corporate insolvencies. Government support paused rather than prevented the economic effects of the pandemic from leading to more businesses entering insolvency, but now that support has ended, we’re starting to see numbers exceed pre-pandemic ones.
“Although the figures show a quarterly fall in corporate insolvencies – driven mainly by a reduction in Creditors’ Voluntary Liquidations and administrations, as well as the traditional summer slowdown in enquiries and appointments – they are still the second highest quarterly figures for corporate insolvencies in a decade.
“Despite the quarterly fall in Creditors’ Voluntary Liquidations, figures for this process are the highest for 10 years and close to the highest we’ve seen since 1960. Compulsory liquidations have also risen compared to the last quarter and are at the highest level since before the pandemic.
“The cause of these increases is a perfect storm of directors running out of road and creditors being able to pursue unpaid debts after the temporary legislation designed to deter this ended in the summer.”
Allan, who is also a partner at insolvency firm Poppleton & Appleby, adds:
“It seems inevitable that numbers will increase in the coming months as the state of the economy, increased costs, and people’s reluctance to spend money because of the cost of living deals a further blow to those businesses that have struggled since the beginning of the pandemic.
“We urge anyone who is worried about the financial health of their business to seek advice. Most R3 members will offer an hour’s free consultation to allow directors to understand more about their situation and outline the potential options for improving it.”
