The number of company insolvencies was up by a third in December as tough trading conditions and high inflation hit business owners
The number of registered company insolvencies in December 2022 was 1,964 – a 32% increase on the previous year (1,489 in December 2021) and 76% higher than pre-pandemic levels (1,119 in December 2019) according to the latest figures from the Office for National Statistics (ONS).
The data shows there were 183 compulsory liquidations in December 2022, more than three and a half times as many as in December 2021 and 8% higher than in December 2019. Numbers of compulsory liquidations have increased from historical lows seen during the pandemic, partly as a result of an increase in winding-up petitions by HMRC.
In December 2022, there were 1,659 creditors’ voluntary liquidations (CVLs), 22% higher than in December 2021 and more than twice as many as December 2019. The numbers of administrations and company voluntary arrangements (CVAs) remained lower than before the pandemic but were higher than in December 2021.
The latest figures show that construction, wholesale motor trade and repairs, and the hospitality industry were worst hit sectors.
Christina Fitzgerald, president of R3, the insolvency and restructuring trade body, said: ‘December and January are critical periods for many firms, and these issues, combined with strikes, bad weather and the economic challenges the UK has faced over the last three years may have dealt a further blow to businesses and business owners.
‘These challenges aren’t going to go away overnight – and directors are very concerned about the effects of energy and staff costs, as well as fears about how the cost of living crisis will impact on their income this year.’
Gareth Harris, partner at RSM UK restructuring advisory, said: ‘In December 2022 company insolvencies have remained very high in historic terms, continuing to be driven by shut down liquidations (CVLs) of smaller companies and HMRC compulsory liquidations.
‘However, this is, in reality, just the “excess insolvencies” that were suppressed during the pandemic and the times of unprecedented government support. What we are yet to really see is an increase in those good, slightly larger companies who are now struggling due to the toxic combination of accumulated debt, high interest rates, inflation, labour shortages and supply chain issues.
‘Whilst these companies are struggling it will take a few months yet before they are reflected in the insolvency/administration figures, but sadly it now seems inevitable that many will have to go through that process to restructure.’
Colin Haig, partner and head of restructuring at Azets, said: ‘Unfortunately, too many management teams are not facing problems early enough and when the decline accelerates often an insolvent liquidation is the only option. That’s not a great option because it’s an end-of-life process for the business.
‘It’s strange to say it but an uptick in administrations, particularly where the process has been used as the structure for a pre-packaged sale, is a much better sign of the UK’s economic resilience than an uptick in compulsory liquidations.’
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