Insolvency Statistics, July 2022 : Guidance to businesses
Insolvency Statistics, July 2022 : Guidance to businesses
Insolvency in the News: R3 and Paris Smith’s Insolvency Partner respond to official July 2022 insolvency statistics and offer guidance to businesses.
Mike Pavitt, head of Corporate Restructuring & Insolvency at Paris Smith, was recently asked on behalf of insolvency trade body R3, to respond to official statistics which show that corporate insolvencies have shot up by more than two thirds compared to July 2021 and are at their highest level in three months. His comments have been picked up by Portsmouth News and the Daily Echo.
What the insolvency statistics show
The sharp increase from July 2021 to 2022 in England and Wales came as more company directors closed the doors, presumably in the belief that their companies’ continued survival was either impossible or improbable.
Analysis of the latest Insolvency Service statistics by R3 (the Association of Business Recovery Professionals) – whose Southern and Thames Valley committee Mike formerly chaired from shows that:
- corporate insolvencies increased by 7.5% in July 2022 to a total of 1,827 compared to June’s total of 1,699. They increased by 66.7% compared to July 2021’s figure of 1,096; and
- individual insolvencies, meanwhile, fell by 12.7% to 9,190 in July 2022 compared to 10,527 in June, but were higher than July last year, and IVA numbers in particular remain high.
Asked what significance these statistics had for the region, Mike said: “In recent months, as we all know only too well, economic pressures have been hitting business from every angle.
“The increase in corporate insolvencies in July was driven by a rise in Creditors’ Voluntary Liquidations (CVLs), which were 59.9% higher than for the same time last year and 60.1% higher than pre-pandemic levels in 2019.
“This suggests that a growing number of company directors – across all sectors although construction and retail remain amongst the worst affected – are choosing to close their businesses, perhaps having concluded that current economic conditions make the company’s long-term survival impossible.”
“On one view, this is not a surprising development. We know that government policies during the pandemic created what many call the ‘Insolvency Gap’, where businesses who would have entered a formal insolvency procedure earlier were delayed from doing so by freely available financial support and/or the removal of the usual triggers for insolvency in terms of creditor enforcement and/or pressure from HMRC. Things have been getting back to ‘normal’ in this respect in 2022, and some of the numbers we are seeing today are the continued result of that adjustment. Even so, there is more to it than this.”
“For our part, we have certainly seen an uptick in new enquiries, many from well-established companies finding it more difficult than anticipated to clear government-backed loans taken out during the pandemic, and/or facing claims and litigation, tax obligations and/or inflationary pressures which they have not been able to mitigate as successfully as they expected. Others have simply grown tired of swimming against the tide for so long, and the unprecedented hikes we are seeing now in wholesale energy prices being charged to business customers may be the last straw.”
On the personal insolvency side, the slight month-on-month fall was helped by a fall in Individual Voluntary Arrangements (IVAs) and Debt Relief Orders (DROs), although the three-month average trend for IVAs is still up, and the month on month bankruptcy numbers actually increased by 7.9%. We know that inflationary pressures are already biting across the board and Reuters have now reported that personal credit card debt is rising at rates last seen in 2005, These pressures are bound to impact upon households’ disposable spending and accordingly upon business.
What advice do we have for business in light of this?
Mike said: “Clearly things are only set to get tougher over the coming months, even allowing for the likelihood of further action by government to soften some of the blows. Even so, it is by no means all doom and gloom. Businesses must of course take such pressures seriously and adapt their approach accordingly but many of the directors we are talking to are just being prudent, planning for the worst even whilst hoping for the best. This is good business practice and will serve to protect boards from personal exposure over the long-term.”
“By taking early action and seeking help from a qualified and regulated professional at the first sign of financial distress on the horizon, you will have more options available than if you had waited for the problems to worsen and will have a greater chance of finding a positive resolution to your concerns. Unexpected fixed cost and supply chain issues have been weathered by business many times before and IPs have the skills to help businesses adapt to new environments where possible. Experience shows that an introduction to a suitably qualified insolvency practitioner accountant today may well result in reassurance, particularly if there is disagreement between the directors as to how to handle these pressures. Sitting down with an IP may reveal options they had not previously considered, allowing them to chart a safer course to calmer waters beyond.”
Most R3 members will offer a free initial consultation to help business owners better understand their position and outline the potential options available should issues arise. If you need help finding the right IP for you, please feel free to contact Mike or any other member of our Corporate Restructuring & Insolvency team for guidance.
- R3 is the trade association for the UK’s insolvency, restructuring, advisory, and turnaround professionals. It represents insolvency practitioners, lawyers, turnaround and restructuring experts, students, and others in the profession. Its members are qualified, regulated and work across the spectrum of the profession, from the global legal and accountancy firms through to smaller, local practices.
- R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see R3’s website for further information.
- R3 stands for ‘Rescue, Recovery, and Renewal’ and is also known as the Association of Business Recovery Professionals.
- For more information on R3 in the South, please contact: James Tourgout, associate director, Deep South Media, Mobile: 07827 806400 Office: 01202 534487, E-mail: firstname.lastname@example.org