Company Insolvencies In The UK Are At Their Highest For A Decade
There’s no hiding the fact that the UK is poised to enter a period of severe, long-term economic depression. Unfortunately, the only question to ask is how long will the recession last.
The latest figures from the UK’s Insolvency Service don’t make for pleasant reading, with company insolvencies at their highest for a decade. Business owners and company directors will be watching the rising figures keenly, and it could help your company’s financial position to understand why insolvencies are so high.
In this article, the expert team at Irwin Insolvency explains and analyses the latest figures released by the Insolvency Service for Q2 in 2022.
Company Insolvencies Are 81 Percent Higher Than in 2021
The Insolvency Service is the organisation that oversees company insolvencies across the UK. Every quarter the organisation releases up-to-date figures detailing how many businesses have officially filed for insolvency.
The latest figures detail the number of businesses in the UK that have filed for insolvency in Q2 of 2022. This period runs from 1 April 2022 to 30 June 2022 and includes businesses that have filed for company voluntary liquidations (CVLs), that have undergone compulsory liquidation, or have been subject to other official insolvency measures, such as company voluntary arrangements (CVAs).
For Q2 in 2022, the Insolvency Service states that 5,629 companies became insolvent. This figure is broken down into the following:
- 4,908 creditors voluntary liquidations (CVLs)
- 368 compulsory liquidations
- 320 administrations
- 32 company voluntary arrangements (CVAs)
- 1 official receivership
The figures are rising quarter by quarter, with this representing an increase of 13 per cent compared to Q1 in 2022. More dramatically, these figures represent an 81 per cent increase on the number of company insolvencies recorded in the same period in 2021.
Company Insolvencies Are at Their Highest Since 2009
Company insolvencies are clearly on the rise, and significantly so. Not only are company insolvencies increasing each quarter, but the number of insolvent companies is much higher in Q2 this year than it has been in over a decade.
In fact, company insolvencies are at their highest since 2009, when the UK was experiencing the fallout resulting from the 2008 financial crisis. These figures encompass both compulsory liquidations and creditors’ voluntary liquidations, both of which are at their highest levels since the financial crisis a decade prior.
The Insolvency Service puts this into perspective, and notes that in the last year (between 1 July 2021 and 30 June 2022) 1 in 228 active companies has become insolvent.
Why Are Company Insolvencies So High?
If you’re a company director, you may be wondering why company insolvencies are so high in 2022. There’s no doubt that a large contributor to the rising number of insolvencies is the poor economic climate we’re currently experiencing in the UK. This is the result of a number of political and economic factors, including:
- The Russian invasion of Ukraine
- Cost of living crisis
The UK is facing supply chain difficulties, many of them brought about by Covid-19 and worsened by Brexit and the Russian invasion of Ukraine. Fuel prices continue to rise, while consumer purchasing power is down due to the ongoing cost of living crisis.
Withdrawal of Covid-19 Support
These are all ongoing contributors to general economic recession, but there is one factor that stands out above the rest, which has directly resulted in many company insolvencies. This is the withdrawal of Covid-19 support, which has resulted in many businesses going bust, as they no longer have the financial support available to them during the pandemic.
This is why figures for Q2 in 2022 are 81 per cent higher than in the same quarter in 2021. A year ago, businesses still had access to financial support schemes such as bounce back loans, which have since been withdrawn and wound down by the government.
Many businesses were simply being propped up. Indeed, the BBC even estimates that of the £47 billion handed out in bounce back loans, as much as £17 billion was lost to fraud.
Contact Irwin Insolvency for More Information on Company Insolvency
Many companies in the UK are facing financial difficulties, but Irwin Insolvency’s expert team of advisors is here to help.
Contact Irwin Insolvency today for more information on company insolvency.