The number of company directors who took their businesses into liquidation on a voluntary basis soared over the course of last year, according to the latest official figures.
Cases of Creditors’ Voluntary Liquidation (CVL) reached the highest levels for a single year since comparable records first started to be collected in the 1960s, the Insolvency Service has said.
CVLs accounted for 85 per cent of all corporate insolvency cases recoded in 2022, with compulsory liquidation rates also up compared with 2021 but down on the typical annual numbers recorded prior to the pandemic.
While CVL rates increased dramatically last year, they were generally subdued during 2020 and the first half of 2021 because the UK government’s Covid policies meant indebted companies were effectively being shielded from their creditors.
However, with those protections having largely been removed, more and more company directors decided that they ought to enter their businesses into liquidation as financial pressures mounted over the course of last year.
The overall number of corporate insolvencies counted across England and Wales last year was the highest for any single year since the financial crisis of 2008/09.
“2022 was the year the insolvency dam burst,” commented Christina Fitzgerald, president of R3, the insolvency and restructuring trade body.
“After two years of being supressed by government support programmes, corporate insolvency numbers hit a 13-year high last year.
“This was mainly due to Creditors’ Voluntary Liquidations reaching their highest level in 62 years as more and more directors turned to this process to close down their businesses.”
Ms Fitzgerald also reflected that for a lot of company directors, rising inflation proved to be an economic headwind too far after several years navigating the various challenges associated with the Covid pandemic.
“After nearly three years of trading through a pandemic, many directors simply ran out of road this year and chose to close their businesses before the choice was taken away from them,” she explained in response to the Insolvency Service’s latest official figures.
Company directors concerned about their business’ financial prospects in the short or medium-term future are advised to seek out relevant expert guidance in relation to their liquidation or administration options sooner rather than later.
