A sharp rise in the number of voluntary business closures suggests many directors whose businesses are facing financial difficulties, feel survival is impossible in the current business climate, a leading North West insolvency expert has warned.
The latest insolvency statistics show there were 1,609 Creditors’ Voluntary Liquidations (CVLs) in July – 60% higher than in July 2021 and in July 2019 before the pandemic. CVLs, a procedure in which directors choose to close down their business, accounted for the majority of insolvencies during the month.
In total there were 1,829 business insolvencies in England and Wales in July, 7.5% higher than the previous month but 67% higher than in July last year and 27% higher than in July 2019.
Allan Cadman, who is North West chair of the insolvency and restructuring trade body R3, says: “The rise in Creditors’ Voluntary Liquidations 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. 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.”
Allan, who is also a partner at insolvency firm Poppleton & Appleby, adds: “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.”
