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The Insolvency Service, in its latest insolvency statistics, mentioned that the number of insolvencies filed for the company rose sharply in the second quarter of 2022. In total, 5,629 are officially reported company insolvencies between 1st April 2022 and 30th June 2022. There were 5,017 insolvencies in the United Kingdom in 2015; 4,908 were creditor-initiated liquidations (CVLs), 368 were forced liquidations, 320 were administrations, and 32 were company-initiated CVAs, and one was a receivership.
Numbers from The Insolvency Service are the highest since 2012 when the markets crashed. In addition, the number of companies going bankrupt is 81% higher than in the second quarter of 2021 and 13% higher than in the first quarter of 2022.
Between 1st July 2021 and 30th June 2022, 228 companies, or 1 in every 228, went bankrupt and into insolvency. Compared to the 12 months ending on 30th June 2021, this rate of 43.9 per 10,000 active companies significantly increased. The construction industry was hit the worst (19%), followed by wholesale/retail commerce, auto/motorcycle repair (13%), and then lodging/food service activities (12%).
Why are Incolvencies so high?
As the financial burden of the pandemic on businesses continues to unfold, we anticipated this increase in company insolvency. Business failures were few from the beginning of the Covid-19 pandemic until around midway through 2021. In Q2 of 2022, the number of compulsory liquidations, administrations, and CVAs was still lower than before the pandemic. This was because of the government’s economic initiatives to help businesses and people. CVLs have reached a record high of 4,908, showing that many directors are closing their businesses because they lack trust in the present atmosphere. The continuous growth in compulsory liquidations since 2022 illustrates that creditors are using their rights to initiate winding-up petitions to reclaim debts. The construction industry was hit the worst (19%), followed by wholesale/retail commerce, auto/motorcycle repair (13%), and then lodging/food service activities (12%).
What is the reason behind businesses going bankrupt?
After covid, many businesses had BBLs and HMRC arrears and low business confidence. Inflation might exceed 13.3%, interest rates are increasing, and fuel prices are high. These circumstances leave businesses vulnerable, and we forecast significant levels of business insolvencies. Company directors are recommended to seek advice from a competent expert if they fear financial difficulties. The sooner a business seeks advice, the more options it will have. Directors must obtain aid as soon as possible to prevent a late rescue. Contact us if you’re worried about your business. Our professional team can work with you to assess your business’s options for the rest of the year and beyond.