Latest Insolvency Rate Conclusions October 2022

In a time where political and financial instability is troubling every facet of the business and domestic side of life, it is important to take regular snapshots of progress and changes that are being witnessed.

For the insolvency industry, a more pinpoint accurate reporting regularity is needed. Simply sticking a finger in the air to take the temperature of industry is no longer going to cut it. There’s a lot to be said for comparing data with previous years, but also there’s a real question mark hanging over what is happening, with so much occurring on the world stage these last few years, stats must be read in context to global events. Some of these instances can easily be seen, for example COVID, global energy crises, recession and in the UK, a chaotic political situation at present.

The Insolvency Service has published its latest research and the conclusions are interesting:

• Corporate insolvencies decreased by 13.5% in September 2022 to a total of 1,679 compared to August’s total of 1,940, and increased by 15.6% compared to September 2021’s figure of 1,453.
• Corporate insolvency figures were also 11.3% higher than September 2019’s figures of 1,508.

What can we take from these stats? What it probably looks like is an ‘ironing out’ of insolvency methods.

Rick Smith, says: “These figures show that the cost-of-living crisis and inflation are now having a real effect on businesses, the increase in corporate insolvencies year on year show that there are huge issues out there and they are having a big impact.

“If businesses are starting to struggle then they need to seek help at the earliest opportunity, don’t bury your head in the sand hoping it will go away – it won’t.”

Christina Fitzgerald, President of R3, the insolvency and restructuring trade body, said: “The corporate insolvency figures published today provide a clear insight into insolvencies before, during, and after the pandemic.

“The monthly fall in corporate insolvencies is due to a drop in Creditors’ Voluntary Liquidations, while the year-on-year increase has mainly been caused by a rise in Compulsory Liquidations, which is likely to be due to the end of legislation around winding-up petitions.

“The increase in corporate insolvencies between September 2022 and September 2019, on the other hand, is due to a significant increase in the number of Creditors’ Voluntary Liquidations.

“This is likely to be due to the triple whammy of the withdrawal of Covid support, the economic turbulence, and the challenging business climate resulting in directors feeling that they are unable to continue and choosing to close their businesses before that choice is taken away from them.

“Businesses have been operating against a backdrop of real uncertainty in recent weeks and months. A volatile pound, a decline in consumer confidence and lower household spending have led to weaker economic growth, and it seems likely that these conditions will get worse before they get better.

“With living costs rising, both business owners and employees are under significant financial strain as rising costs have meant rising salary demands and increasing pressure on margins, which some businesses haven’t, unfortunately, been able to meet.

“Sky-rocketing energy bills are also a major challenge. While the recently announced emergency support package will go some way towards mitigating these concerns, it may not provide enough of a safety net.”

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