A sharp rise in the number of Creditors’ Voluntary Liquidations (CVLs) saw the overall level of corporate insolvencies across England and Wales increase to a 13-year high during the third quarter of 2022.
Inflationary pressures and sharply rising energy bills have been cited as key reasons why so many company directors took their businesses into liquidation voluntarily in the three months to the end of June.
The Covid pandemic precipitated a hugely challenging period for company bosses across the UK and most of the world but insolvency rates remained relatively low during 2020 and 2021 as a result of government protections and support measures.
Now with most of those measures having been lifted, directors are increasingly taking their companies into liquidation when faced with situations in which they cannot afford to pay their bills.
A total of 5,629 companies entered insolvency during the second quarter of this year, which is a number not reached in a three-month period since Q3 2009.
The peak number of corporate insolvencies recorded in England and Wales during a single quarter happened in late 2008 in the immediate aftermath of the global financial crisis.
Official data on CVLs and insolvencies are compiled by the Office for National Statistics (ONS), which is reporting that one in 10 UK business bosses would currently describe their enterprises as being either moderately or severely at risk of insolvency.
Around 22 per cent of company decisionmakers rated rising energy bills as their most pressing financial concern, with that figure as high as 30 per cent among those whose businesses employ between one and 50 people.
Difficulties in meeting debt obligations, the rising costs associated with raw materials and supply chain disruptions also emerged from the ONS’ data as common reasons why British businesses are insolvency and liquidation.
According to the official figures for the second quarter, the construction, manufacturing, accommodation and food services, and the wholesale and retail trade sectors collectively accounted for a majority of business insolvencies in the first half of 2022.
Company directors who are becoming increasingly concerned about their business’ capacity to pay their bills are advised to seek out expert guidance on insolvency and liquidation issues sooner rather than later.
