INCREASED INSOLVENCIES
Released On 24th Mar 2023
As we mentioned earlier in the year, insolvency numbers continue to increase. In December the number of registered company insolvencies was 1,964, a 32% increase on the same month in 2021 and 76% higher than the number registered in the pre-pandemic month of December 2019.
The number of compulsory liquidations increased to the highest quarterly number since the start of the pandemic. Much of this increase is due to petitions presented by HMRC and a high number of petitions presented from a single bank.
Whist all sectors saw a rise, the construction industry represented the biggest increase.
Interestingly the rescue orientated procedures such as CVAs and Administrations were not reporting the same level of increase as liquidations, although still up year-on-year. We anticipate this is representative of an innate time lag in those proceedings rather than a move away from them.
Certainly, when we consider the instructions that we have been involved in recently there has been a healthy increase in businesses seeking advice earlier and thus enabling a rescue or restructure process to be used instead of the finality of a liquidation. Of course, many of these solutions don’t require a formal process and so aren’t reflected in the statistics at all.
Insolvency numbers were artificially low during the pandemic because of the Government’s financial support for businesses, as well as specific temporary measures that helped companies restructure and avoid entering an insolvency process.
It is therefore inevitable that we would see an increase in insolvencies as that support wains and not all of those businesses have returned to profitability. We are, however, starting to see the threat of recession impact business owners’ confidence. When considering whether to embark on a rescue plan it is important to forecast the future prospects and these are starting to show a lack of confidence.
On the other hand we are still seeing a high level of appetite on the part of acquirers as they look for under-valued businesses or those that can be turned around or added to existing business streams.
