The final removal of all creditor restrictions and pandemic support in March was the catalyst for the pent up demand for insolvency procedures to finally be serviced.
So while it was unlikely that the historically high corporate insolvency numbers would be repeated or bettered but in the latest set of monthly company insolvency statistics for April which have been published by the Insolvency Service, they have come very close.
The total number of corporate insolvencies for April is 1,991 - 123 lower than the record number recorded in March but still the second highest monthly total seen in over three years.
It’s more than double the 925 registered in April 2021 is 39% higher than the last pre-pandemic total of 1,429 from April 2019.
It marks a milestone of being the twelfth consecutive month - a whole calendar year - when the number of corporate insolvencies was both over 1,000 and higher than the corresponding total in the same month an actual year ago.
Digging into the underlying details of the 1,991 English and Welsh insolvencies, the overwhelming majority remain Creditor Voluntary Liquidations (CVLs) with 1,777 CVLs recorded which makes up 89% of the total amount, up 2% from last month’s record total.
The 1,777 is down slightly on the 1,843 registered last month but is more than double the number of CVLs from a year ago and 74% higher than from April 2019.
The numbers for the other types of company insolvencies such as compulsory liquidations continue to remain lower than before the pandemic although in this case there were three times as many compulsory liquidations in April 2022 than a year ago and administrations are 51% higher than a year ago too.
There were a total of 91 compulsory liquidations including winding up petitions (down from 131 in March); 113 administrations (down from 129 last month) and 10 company voluntary arrangements (CVAs) (up from 9 last month).
A closer look at these figures shows the following:-
Additionally 38 insolvency moratoriums were obtained between June 26 2020 and April 30 2022 and 12 companies had their restructuring plans registered at Companies House. Both of these procedures were created under the Corporate Insolvency and Governance Act 2020.
There were a total of 92 company insolvencies registered in Scotland in April 2022. This is up from the 86 recorded in March and is 142% higher than the total from a year ago but 10% lower than in April 2019.
This total was made up of 73 CVLs (up 2 from March); 17 compulsory liquidations (up 9 from last month); one administration (down from six a month ago) and one CVA (up from zero in March). There were no receivership appointments recorded.
The Insolvency Service makes note of the fact that while compulsory liquidations have traditionally been the main component driver of Scottish company insolvencies, since April 2020 there have been nearly three times as many CVLs as compulsory liquidations with no sign of this number abating.
There were 13 company insolvencies recorded In Northern Ireland last month which is seven fewer than the number from last month. This figure is still 2.6 times higher than a year ago but 32% lower than in April 2019.
The total was made up of six compulsory liquidations (down one from last month); four CVLs (down from 12 in March); two administrations (down from four) and one CVA (up from zero). There were no receivership appointments recorded.
The total number of UK company insolvencies for April 2022 is 2,096 which is 124 lower than the 2,220 recorded in March.
April makes up the first month of Q2 and in comparison to January 2022 (the first month of Q1) is 423 cases higher already.
“Directors are choosing to close their businesses now rather than being forced to in the future”
Christina Fitzgerald, the new President of R3, the insolvency and restructuring trade body, said: “The monthly fall in corporate insolvencies has mainly been driven by a reduction in creditors voluntary liquidations (CVLs). However the significant year on year rise in corporate insolvencies has been driven by the fact that numbers for this process have more than doubled since April 2021.
“This highlights the role the Government’s support initiatives played in preventing the economic damage of the pandemic from translating into an increase in corporate insolvencies.
“It also suggests that large numbers of directors lack confidence in their ability to continue trading in the current climate, and are choosing to close their business now rather than being forced to in the future.
“The figures published today reflect the continued toll the economic turbulence is taking on the business community. The boom many were hoping for when pandemic restrictions ended simply hasn’t happened as the UK has moved from one damaging set of economic stressors to another without any time to draw breath.
“Businesses are trying to trade amidst rising inflation, a contracting economy and consumer confidence at a near historic low - lower than during the peak of the pandemic - due to cost of living concerns.
“Alongside this, rising fuel and energy costs and demands for increased wages from employees mean that it’s a challenge simply to break even at the moment, especially for those businesses who are still reeling from the pandemic.”
Chris Horner, insolvency director with BusinessRescueExpert, agrees and said: “The large disparity between the number of CVLs and all other types of insolvencies remains the clearest sign that a lot of businesses are choosing the certainty of closing their business and not having to worry about juggling debt and repayments in the months ahead.
“We’ve already seen the withdrawal of government support for small businesses and a rise in creditors and commercial landlords taking action against companies that are simply unable to keep up with their debt commitments.
“HMRC are also beginning to seriously look at recovering outstanding corporation tax and VAT arrears and signalling to lenders that they want to see more action being taken in recovering outstanding or overdue bounce back loan repayments.
“All of which means that for a lot of otherwise viable businesses weighed down by debt arrears, that the next few months will have gone from being merely difficult to virtually impossible.”
Very few things have been consistent over the past couple of years but one thing that is is that feeling that these are the most challenging operating conditions for a generation or more.
Just when the outlook appears to be brightening and conditions becoming more favourable, another storm appears seemingly out of nowhere to deluge companies already with their heads just above water.
There is one constant that will remain no matter what happens to the changing external conditions and that’s the availability of help and support.
We offer a free, virtual consultation for any business owner or director who wants one and needs a friendly and experienced ear to hear about their struggles first hand.
Based on this information, they will be able to help narrow down the options and strategies businesses can use, right now, to improve their situation and face the next few months with renewed confidence.
Without getting advice then they’ll remain at the mercy of changeable conditions - which we wouldn’t recommend whether you're in business or a boat.