|Year||Compulsory liquidations||CVLs||Administrations||CVAs||Receivership appointments||Total registered company insolvencies|
|2023 (Q1 only)||652||4739||318||38||0||5,747|
When Covid-19 hit, insolvency specialists predicted an immediate rise in corporate insolvencies. However, this rise did not happen and 2020 recorded significantly low figures, which it transpired was a result of the changes to the insolvency legislation and support packages put in place by the government.
A year after the pandemic the Insolvency Service recorded 14,061 corporate insolvencies, only 1,501 more than those recorded during the pandemic and 3,103 less than 2019. In 2022, this figure jumped 57% to 22,120, which was the highest rise since the recession in 2009 that followed the financial crash. The construction, manufacturing, accommodation and food service activities and wholesale and retail trade industries together accounted for 53% of the total of the business insolvencies in the first half of 2022.
A number of factors have played a part in the rise of corporate insolvencies in 2022, such as the high energy prices, difficulties in meeting debt obligations, rising costs of raw materials, and supply chain disruptions.
The last quarter of 2022, following the end of the government support schemes, saw a 30% jump in corporate insolvencies on the same period for the previous year. These figures, some report, confirmed that the excess insolvencies that were predicted in 2020 and put off by the support packages were now in ‘free-flow’.
On 28 April 2023, the Insolvency Service published the company insolvency statistics for 1 January to 31 March 2023. This showed that there were 5,747 company insolvencies in quarter one of 2023, comprising of 4,739 creditors’ voluntary liquidations (CVLs), 652 compulsory liquidations, 318 administrations and 38 company voluntary arrangements (CVAs). There were no receivership appointments.
This figure was 4% lower than quarter four of 2022, but 18% higher than in quarter one of 2022. The number of CVLs remained close to the highest quarterly level since the start of the series in 1960 by quarter two of 2022. The number of compulsory liquidations also increased but remained slightly lower than levels seen prior to the pandemic.
The Insolvency Service recorded that one in 197 active companies entered insolvent liquidation between 1 April 2022 and 31 March 2023. This was an increase from the 38.9 per 10,000 active companies that entered liquidation in the 12 months ending 31 March 2022.
As we are approaching the end of quarter two for 2023, what are we expecting the figures to look like?
I think it’s safe to say the figures will remain high as businesses continue to deal with inflation and supply chain issues, as well as dealing with increased working capital demands and a challenging credit environment causing liquidity issues.
What is clear is that 2023 will be the toughest year for UK businesses since the early 1990s. However, with that being said, I do believe that the amount of corporate insolvencies will start to slow down as the UK’s economy starts to turn a corner in the latter half of 2023.
Many businesses will face a prolonged recovery so it’s important that they build operational resilience to optimise growth and recognise the signs of stress early on to avoid any further economic surprises.