The number of corporate insolvencies has continued to rise, driven in part by the rise in winding-up petitions as HMRC and other creditors pursue unpaid debts.
The latest government figures show that there were 2,029 corporate insolvencies in November in England and Wales, which was 4% higher than the previous month and 21% higher than November last year. It was also 35% higher than in November 2019.
The rise was mainly driven by an increase in compulsory liquidations, partly due to a rise in winding up petitions from HMRC, while creditor voluntary liquidations (CVLS) – where directors close their companies voluntarily – and administration numbers have also increased.
Allan Cadman, who is North West chair of the insolvency and restructuring trade body R3, said: “Increases in CVLs and compulsory liquidations are the key drivers of the increase from this time last year and from three years ago.
“What we’re seeing here is a perfect storm of creditors pursuing unpaid debts and directors choosing to close down their businesses – either before this choice is taken away from them or because they have simply run out of road.
“An increasing number of businesses are buckling under the strain of more than two and half years of economic turmoil. Companies have been battered by the pandemic, rising costs, reduced spending and increasing inflation, and a growing number are now turning to an insolvency process to resolve their financial distress.
“For many businesses, the Christmas and post-Christmas period is a critical part of their year and the time when a large percentage their revenue is generated. However, given how stretched people’s finances are this year, it remains to be seen whether this will be a happy Christmas or a final one for these firms.
Allan, who is also an insolvency practitioner with Poppleton & Appleby, adds: “Our message to anyone worried about their business is: Seek advice as early as possible. While it’s incredibly hard to voice your fears about a business which you own or run, having that conversation with a qualified advisor when your worries are new will lead to better outcomes than if you’d waited until your problems became more severe.
“Most R3 members will give prospective clients a free consultation so they can understand more about their situation and outline the potential options for resolving it.”