A record number of companies went into voluntary liquidation in England and Wales at the end of last year according to data issued by The Insolvency Service. The increase followed the withdrawal of the government’s Covid support measures.
During the final quarter of 2021, there were 4,175 Creditors’ Voluntary Liquidations (CVLs) where directors placed their companies into liquidation. This was the highest quarterly number since reporting started in 1960 and was noted to “coincide with the phasing out of measures put in place to support businesses during the coronavirus pandemic”.
The overall number of company insolvencies in the final quarter of 2021 was 18% higher than the previous quarter and 51% higher than Q4 in 2020.
Much of the support for businesses affected by the pandemic was withdrawn on 1st October 2021, which impacted these figures and will undoubtedly lead to further CVLs.
Additional support was provided for businesses impacted by the outbreak of the Omicron variant, including grants for eligible businesses of up to £6,000 per premises. Whilst this may have provided some relief to businesses, it is estimated that those in the hospitality trade lost 40-60% of their normal December trade which would normally account for a significant percentage of their annual turnover.
A Freedom of Information request was made to the Insolvency Service asking how many companies that had taken out a Bounce Back Loan had also been declared insolvent. The Insolvency Service identified that 9,733 companies in England, Wales and Scotland had entered into insolvency between 1 May 2020 and 31 October 2021 having taken out a Bounce Back Loan. This includes companies that entered compulsory liquidation, creditors’ voluntary liquidation, administration, and administrative receivership.
It is anticipated that the number of businesses facing insolvency in the first two quarters of 2022 will remain at a high level. This follows on from the further disruption to business in December and January, the effects of the withdrawal of the government’s Covid support scheme and the requirement for repayments to commence for some Bounce Back Loans.
As Insolvency Practitioners we can provide an independent view of a company and explain the options that are available. The earlier that steps are taken to resolve any potential problems, the more options are available. We do not automatically turn to insolvency as a solution.
For further help and guidance for your own or your clients’ businesses please email info@rpg.co.uk or call 0161 608 0000 and ask for Gareth Hunt.
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