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R3 comments on July 2022 insolvency statistics

Eleanor Temple, chair of insolvency and restructuring trade body R3 in Yorkshire and a barrister at Kings Chambers in Leeds, responds to today’s publication of the July 2022 corporate and individual insolvency statistics for England and Wales:

“The increase in corporate insolvencies is being driven by a rise in Creditors’ Voluntary Liquidations (CVLs), which were 59.9% higher than this time last year, and 60.1% higher than pre-pandemic levels in 2019. This suggests that a growing number of company directors are choosing to close their businesses, perhaps because they believe that the current economic conditions make survival impossible.

“In recent months, economic pressures have been hitting firms from every angle. Inflation remains high and the economy is shrinking, with GDP estimated to have fallen by 0.1% in Q2 of this year and by 0.6% in June, undoing the small boost to the economy we experienced in May.

“Despite an unexpected rise in consumer confidence last month, people are still being cautious with how they spend their money, meaning many businesses are struggling to bring in the revenue they need to offset spiralling costs.

“Coupled with this, the number of open job vacancies has continued to grow since the pandemic, while July saw the slowest increase in the number of permanent jobs filled for 17 months. This ongoing labour shortage remains a concern for many small firms that may not be able to afford to raise wages to attract the workers they need to operate at full capacity.

“Things are only set to get harder this year, so it is more important than ever that anyone running a business knows where to go to seek advice about their finances. Most R3 members will offer a free initial consultation to help business owners better understand their position and outline the potential options available should issues arise.

“On the personal insolvency side, the month-on-month fall shown in the figures published today was a result of a fall in Individual Voluntary Arrangements (IVAs) and Debt Relief Orders (DROs), although bankruptcy numbers increased by 7.9%.

“Despite this, times are still tough for people in England and Wales. Household budgets are being stretched from all directions at the moment and many families are worried about how they are going to pay their bills. For most people, their income is the same but almost all outgoings have shot up, and this just won’t be sustainable for much longer.

“With the average energy bill expected to hit £3,582 by October, as well as warnings from the Bank of England that inflation could soar to 13% or more this year, there is little respite in sight for millions of people across the UK – many of whom are already suffering from the impact of the pandemic.

“To anyone worried about their finances – business or personal – I would reiterate that these concerns do not go away on their own. By taking action early and seeking help from a qualified professional at the first sign of financial distress, you will have more options available to you than if you had waited for the problems to worsen and a greater chance of finding a positive resolution to your concerns.”