Business insolvencies have risen significantly in 2022, with more than 22,000 companies falling into insolvency according to recent figures. This marks a 30% increase in the number of firms that have gone bust in comparison to 2021, a worrying trend that could signal a further rise in insolvencies in the coming years.
The cause of the UK increase in business insolvency
What it boils down to is that, combined with a weakening economy and the rising cost of raw materials, analysts foresee a continuation of business shutdowns as more companies struggle to stay afloat in an economic downturn.
Company insolvencies in England and Wales reached a new high of 22,109, according to official data, and that was during the recession in 2009 that followed the financial crash, and is 57% higher than in 2021
Christina Fitzgerald, the president of R3, the insolvency and restructuring trade body, said:
“2022 was the year the insolvency dam burst.”
The UK industries affected by insolvency
Thousands of small and medium-sized UK-based firms are also believed to have ceased trading and shut down before becoming insolvent, which would be a dramatic change from last year.
Rises in interest rates, energy prices, and Pandemic loans now due, continue to place pressure on a significant number of businesses that are simply not able to make the payments they owe.
Samantha Keen, president of the Insolvency Practitioners Association said:
“This stress is now deepening and spreading to all sectors of the economy as falling confidence affects investment decisions, contract renewals and access to credit.”
The ripple effect – major UK brands continue to tumble
The latest fatality in top brand insolvency in the UK comes from ‘Paperchase’ which went into administration this morning and was quickly snapped up by the grocery giant ‘Tesco’ as part of a pre-pack deal.
Jan Merchant, managing director of Tesco home and clothing said:
“Paperchase is a well-loved brand by so many, and we’re proud to bring it to Tesco stores across the UK.”
Great news, of course, that the brand has been saved but the same cannot be said for the 106 UK-based Paperchase stores currently in operation, which will all close.
But what of those SMEs that are still managing to stay afloat?
50% more UK-listed companies signal that they expect a decrease in profits than last year.
The latest statistics also reveal the highest number of UK firms choosing to be wound up voluntarily since 1960.
Personal insolvency, as one might expect, is also on a high: Insolvencies reached their highest level for three years when a growing number of people opted to enter into individual voluntary arrangements (IVAs) to repay their debts.
According to the government’s Insolvency Service, there were 118,850 individual insolvencies, up from 110,045 in 2021. IVAs accounted for nearly three-quarters (74%) of all personal insolvencies across 2022.
The UK government’s latest statistics
According to recent government statistics:
- The third quarter of 2022 (1 July – 30 September) saw a total of 5,595 registered company insolvencies: 4,800 were private creditors’ voluntary liquidations (CVLs), 492 were compulsory liquidations, 274 were company administrations, 29 were company voluntary arrangements (CVAs). There were no receivership appointments.
- The number of company insolvencies in Q3 2022 was 1% lower than in Q2 2022 but 40% higher than in Q3 2021. The number of CVLs remained close to the highest quarterly level since the start of the series in 1960 (Q2 2022). The number of compulsory liquidations also increased to the highest quarterly number since the start of the coronavirus (COVID-19) pandemic but remained lower than pre-pandemic levels.
- One in 213 active companies (at a rate of 46.9 per 10,000 active companies) entered liquidation between 1 October 2021 and 30 September 2022. This was an increase from the 29.3 per 10,000 active companies that entered liquidation in the 12 months ending 30 September 2021.
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