The latest figures published by the Insolvency Service provide bleak reading – but the picture may not be quite as bad as it first looks.
2022 saw 22,109 companies in England and Wales enter into a formal insolvency procedure compared with 14,061 in 2021; that’s a year on year increase of 57%.
Alarm bells will be ringing for company directors across the region. Bank rates raised for the 10th consecutive time, soaring energy prices, fear of global recession, consumers slashing their non-essential spending – when will it end?
However the picture may not be quite as bad as it first seems.
Insolvency figures for 2020 and 2021 were lower than pre pandemic levels. The annual number of company insolvencies in England and Wales for 2019 (the last year pre pandemic) was 17,164 before the number dropped dramatically in 2020. The increase from 2019 to 2022 is ‘only’ 29% which suggests that the 57% 12 month increase may, in effect, be artificially inflated. Many businesses that would not otherwise have survived, were able to stay afloat for longer because of the Covid support measures put in place by the Government.
It is worth noting that the number of compulsory liquidations reached a record low number in 2020 and 2021 and only started to rise again in 2022. This was primarily because HMRC and the banks applied leniency given the conditions of the pandemic, and did not force businesses into liquidation. The impact of compulsory liquidations re-commencing has had a significant effect on the overall insolvency numbers; again making the change in numbers look more extreme than it really is. It is however noted that compulsory liquidations remain well below the level of 2019. It is likely however that given the significant increase in winding up petitions being issued in the last two quarters of 2022 that this figure will again rise.
Although the outlook is not immediately bright there is also hope for business owners that external factors may slowly be improving.
According to the Bank of England, the UK is set to enter recession this year but it will be shorter and less severe than previously thought, with the hope that inflation is now starting to fall.
These reports should give some hope. But nevertheless, the sad fact is that the number of businesses entering an insolvent procedure is increasing. This is the time for company directors to make sure they have taken action.
My advice as an Insolvency Practitioner is always “the sooner advice is sought, the more options there are available”. We will work hard to keep the doors open rather than to close a business down.
Without proper planning and advice, more businesses will be at risk of shutting down their operations. Accountants and Insolvency Practitioners can work together to ensure that businesses become more efficient and survive with a view to thriving.
Review your cash flow planning so that potential difficulties can be identified as early as possible and further advice sought.
Businesses who have obtained Bounce Back Loans can request extensions to the repayments and I would recommend speaking with your bank in the first instance. Remember these loans all benefit from fixed interest rates.
Similarly HM Revenue & Customs are often open to “Time to Pay agreements” which provide a relief to short to medium term cash flows.
Please seek advice as early as possible from your accountant and then an insolvency practitioner and keep your options open.
As ever, you are facing any financial uncertainty, please contact our Licensed Insolvency Practitioners at Royce Peeling Green incorporating Crawfords for a free, no-obligation and confidential chat.
Our Licensed Insolvency Practitioners have many years of experience in business recovery and insolvency and they can provide you with impartial advice and recommendations, entirely without obligation.
Contact us now to discuss how we can help you. Email Gareth Hunt at ghunt@rpg.co.uk or call 0161 608 0000
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