Rising Company Insolvency
The pattern of rising company insolvencies in Quarter 3 follows a pattern that we have seen throughout the year. In each quarter of 2022, the number of insolvent companies has increased when compared with statistics for the same period in 2021. When we look at the number of insolvencies for the period of June to September 2022, the number of company insolvencies is 40% higher than at this time last year.
Although COVID bounce back loans ended last year and practically all restrictions on businesses were removed by July 2021, government support measures for businesses affected by the financial implications of COVID remained in the form of the Corporate Insolvency and Governance Act. This act placed temporary restrictions on winding-up petitions, allowing companies in financial difficulty more time to recover and ensure that their business is still viable.
The Corporate Insolvency and Governance Act returned to its pre-pandemic position on the 1st April 2022, meaning the end of restrictions on winding-up petitions. Although businesses continue to operate without COVID-related limits, the loss of these support methods, correlates with the significant increase in insolvencies this year. With businesses facing the challenges associated with inflation, rising cost of living, rising operating costs and rising energy costs, amongst other issues, it has become increasingly more difficult for them to remain viable in the long term without the government support that was previously offered.
An increase in winding-up petitions
The majority of company insolvency cases this year have been Creditors’ Voluntary Liquidations (CVL), however, there has been an increase in Compulsory Liquidations (CWU) in Quarter 3 of this year. Compared with compulsory liquidations in Quarter 2, there was an increase of 28% in Quarter 3.
The rise in CWU liquidations would suggest that following the end of winding-up restrictions, creditors are taking a more active approach in the winding-up of insolvent companies. Recognising that debtors are unlikely to remain viable as a business, in order to ensure that their liabilities are paid to them, they are petitioning to the court for the winding-up of debtors in financial difficulty.
Company Insolvency Options
If your business is facing financial problems as a result of the loss of Government COVID-support or the pressures of rising operational costs, it’s important to seek advice on the options available to you. Liquidation may not be the only outcome for your business, so please do talk to our friendly team to learn more.
Call us on 02380 651441 or contact us here to arrange a free initial consultation.