The number of business insolvencies rose by 11% in 2021 driven by a rise in the number of voluntary business closures, according to new government figures.
The latest statistics from the Insolvency Service show that Creditors’ Voluntary Liquidations (CVLs) – a procedure where company directors close their business voluntarily – reached levels not seen since 2009.
In total there were 14,048 underlying corporate insolvencies in England and Wales during 2021. Despite the year-on-year rise, the number of insolvencies was 18% lower than in 2019.
Allan Cadman, a North West insolvency expert who is also regional chair of the insolvency and restructuring trade body R3, says: “The increase in 2021 – and the surge in CVLs in the final quarter – suggests that many directors are opting to close their businesses as they lack confidence in their trading prospects in the current climate. And while insolvencies still haven’t reached pre-pandemic levels, this is unlikely to remain the case for long.
“The increase also reflects the torrid 12 months businesses have faced as they attempt to carry on trading in the second year of a pandemic amidst uncertainty, change and challenge. Businesses have had to trade through lockdowns and restrictions, increases in energy prices, and supply chain issues. And they’ve done so in an economy which only returned to where it was before the pandemic in November – just weeks before the Government’s Omicron measures were introduced.”
Allan, who is also a partner at insolvency firm Poppleton & Appleby, adds: “Given the current climate, we urge company directors to be aware of the signs of financial distress and seek help if any present themselves. Our message is a simple one: if you’re having problems paying staff or suppliers, your stock levels are piling up, or you’re worried about paying your rent or your tax debts, or your business’ finances or future, seek advice as soon as possible.
“Talking about your concerns about your business is hard, but the sooner you do, the more options you have to turn it around, and the more time you have to take a decision about your next steps. Most R3 members will offer a free hour’s consultation to concerned directors so they can understand the issues their business faces, and outline the potential options for improving its situation.”
