2022 was the year the corporate insolvency dam burst, with numbers of insolvent businesses hitting a 13-year high.
This is according to the Midlands branch of insolvency and restructuring body R3 and follows statistics published by the Insolvency Service which show that corporate insolvencies in England and Wales increased by 57.3% last year [2022] to 22,109 compared to 2021’s figure of 14,059, and by 75% in comparison to 12,632 in 2020. The statistics also show an increase of 28.8% on 2019’s pre-pandemic figure of 17,164.
R3 Midlands chair Eddie Williams, a partner at PwC in the East Midlands, said: “2022 was the year the business insolvency floodgates opened. After two years of being supressed by Government support programmes, annual corporate insolvency numbers hit a 13-year peak. This was mainly due to Creditors’ Voluntary Liquidations reaching their highest level in 62 years as more and more directors turned to this process to close down their businesses.
“After nearly three years of trading through a pandemic, and in the face of the end of Government support, rising costs and a cost-of-living crisis, many directors simply ran out of road last year and chose to close their businesses before the choice was taken away from them.
“Alongside this, the end of the Government’s temporary legislation on winding-up orders has left creditors free to pursue unpaid debts, which is why Compulsory Liquidation numbers are at their highest in three years.
“With the entire supply chain under pressure from increased costs, the debtor flexibility we saw from creditors during, and immediately after, the pandemic has disappeared. Many are now taking action to recover monies owed to them in an attempt to balance their own books.
“Inflation is still high, supply chains remain squeezed, and people are still worried about the cost of living, so it’s likely we’ll see insolvencies continue to rise this year, unless the trading climate takes a drastic turn for the better.
“We urge directors to be aware of signs that their business is financially distressed and act as soon as they see them. Rising stock, problems paying staff or suppliers and cashflow issues are all indications a business is struggling. Seeking advice as soon as they arise gives directors more options, more time to make a decision and a better outcome than if they’d waited until the situation had become more severe.”
