Home Legal & Insurance Voluntary company closures double in a year

Voluntary company closures double in a year

Allan Cadman, a partner at insolvency firm Poppleton & Appleby and the regional chair of the insolvency and restructuring trade body R3

The number of business insolvencies fell by 3% in October compared to the previous month but rose by 64% compared to the same month last year, according to official figures released today.

The figures from the Insolvency Service show that the year on year rise has been driven by an increase in Creditors’ Voluntary Liquidations (CVLs), a procedure where company directors choose to close their business voluntarily. Of the 1,405 company insolvencies in October, 1,248 were CVLs – double that of the same month last year.

Allan Cadman, a North West insolvency expert who is also regional chair of the insolvency and restructuring trade body R3, says: “While the number of Creditors’ Voluntary Liquidations has fallen since the previous month, there are still twice as many companies entering this procedure than this time last year, and nearly 20% more than in 2019.

“This would suggest that there are still a fair number of company directors who are choosing to close their businesses after deeming post-pandemic success unlikely. However, the fact that overall corporate insolvencies are 5% lower than the number in October 2019 suggests that the Government’s support measures have prevented the economic consequences of COVID from translating into higher levels of corporate insolvency.

“The business climate is still harsh. Economic growth is slowing, costs are rising, and consumer confidence is falling. And although consumer spending is higher than it was this time last year, rising COVID case numbers and sharp energy price rises have meant many businesses aren’t seeing the benefits of this.

“As we move closer to Christmas, we would urge company directors to be mindful of the signs of business distress, which include cashflow problems, issues paying invoices, and concerns about paying staff, and seek advice as soon as they appear.”

Allan, who is also a partner at insolvency firm Poppleton & Appleby, adds: “Anyone who is concerned or anxious about their business finances should seek advice as soon as possible. Early advice gives you more potential options and more time to make a decision.”