What other statistics do you need to pay attention to?

Summer has finally arrived bringing with it unprecedented blistering temperatures and increasingly, it’s businesses that are starting to feel the heat this year. 

The Insolvency Service have issued their latest corporate insolvency statistics for the month of June and it’s a familiar story to last month’s figures. 

The total number of corporate insolvencies recorded was 1,691 – which was 7.2% (126) lower than the total in May so at first glance it looks like insolvencies and liquidations are going down, which could indicate a healthier economy.

But if we look closer and consider the year-on-year figures then it looks a little different. 

The total of 1,691 is only the fourth highest monthly total this year – but taken individually it would be the highest monthly total recorded since January 2019.

The fact that the three higher monthly totals have all happened in the previous three months indicates growing overall momentum even if the individual totals are slightly lower month on month.

Compared to the same month last year with 1,207 insolvencies, the figures have grown by 40% and are a solid 15% higher than the 1,467 recorded in June 2019 – the last pre-pandemic monthly equivalent. 

The figure also marks the fourteenth consecutive month when the number of corporate insolvencies was both over 1,000 and higher than the corresponding monthly figure from a year previously. 

If we examine the 1,691 corporate insolvencies in England and Wales more closely, we see that the majority remains Creditor Voluntary Liquidations (CVLs) with 1,456 – which makes up 86% of the total recorded.

There were 30% more CVLs last month than a year ago and 44% more than in 2019.

There were a total of 136 compulsory liquidations including winding up petitions (up from 135 in May). There were 90 administrations (up from 84 last month) and 8 company voluntary arrangements (CVAs) which was down from 14 last month.

The increasing number of compulsory liquidations was more than 3.5 times higher than a year ago (258% higher) although still 51% lower than the pre pandemic period of June 2019.  This is continuing to be driven by creditors taking more aggressive recovery action for outstanding debts by issuing statutory demands and bringing more winding up petitions before the courts.

The increasing number of administrations saw them rise by 131% or 2.3 times the number a year ago but are still 40% down on the number seen in June 2019. 

CVAs remain suppressed with a monthly reduction to 8 which is 43% lower than 12 months ago and 77% lower than in June 2019. 

There was one receivership appointment recorded in June – the first since May 2021. 

The Insolvency Service notes that between June 26 2020 and June 30 2022 there were 39 insolvency moratoriums obtained in England and Wales and 12 companies had their restructuring plans registered at Companies House.  

Scotland 

In Scotland there were 76 company insolvencies recorded in June, down from 93 in May. This was the same total as a year ago and 12% higher than in June 2019. 

This was made up of 67 CVLs (down one from last month); eight  compulsory liquidations (down 11 from May) and one administration (down five from last month).  There were no CVAs or receiverships.

Companies House in Scotland has not registered any moratoriums but between June 26 2020 and June 30 2022 has seen two companies register their restructuring plan.

Compulsory liquidations have traditionally been the main drivers of Scottish company insolvencies but since April 2020, there have been more than three times as many CVLs recorded as compulsory liquidations with no sign of this being reversed in the immediate future. 

Northern Ireland

In Northern Ireland, 26 company insolvencies were recorded in June, up from 20 seen last month. This growing total is more than double the total recorded a year ago although remains 10% lower than the total from June 2019.

The total was made up of 12 CVLs (down from 17 last month;11 compulsory liquidations (up from three in May); two CVAs and one administration with no receivership appointments.

The total number of UK company insolvencies for June 2022 is 1,793, which is 137 lower than the 1,930 recorded in May.

Nicky Fisher, Vice 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), a procedure initiated by directors of insolvent firms to close their company.

“This fall in corporate insolvencies matches May’s unexpectedly positive GDP figures – however business owners should not be complacent given the ongoing economic pressures which will start to be felt in insolvency numbers in the next few months.

“Despite these positive statistics, inflation continues to have an impact on all aspects of business with input costs and overheads heading in the wrong direction. Not only are directors facing immediate strain to deal with this inflationary pressure, but they will also be looking at re-evaluating investment decisions and wider business strategies in the medium term. This is likely to act as a further drag on the economy in the months ahead.

“At the same time, consumer confidence has hit its lowest point since the start of the pandemic, bringing down consumer spending, which could mean that sectors such as travel, retail and hospitality could particularly struggle as these are the things people usually cut back on first.”

Chris Horner, insolvency director with BusinessRescueExpert, also believes that the slight reduction in month on month totals are misleading. 

He said: “Anybody who’s been to the seaside knows that when the tide goes out a long way in a short time then it’s going to be followed very quickly by a big wave so you’d best get out of the way.

“The Autumn is going to bring increased energy bills for most businesses in multiples none of us will have seen before, some looking at rises of three, four or five times their current amounts which are going to have to be faced. 

“This is in addition to double digit inflation and other more sector specific problems regarding staffing, supplies and materials. 

“If there is a temporary lull in the number of businesses liquidating or pursuing other insolvency procedures then smart owners and directors can take advantage of this capacity in the system to get some advice on their own business right now and will still have the time to act on it before any wave of activity arrives.”

Summer is traditionally the time for holidays and taking time to relax and recuperate in the midpoint of the year but as much as that can be true for business owners, this year feels different. 

As many businesses are having to work even harder just to stand still, it could be the perfect time to take a broader look at the situation the company finds itself in and what improvements can be made, right now, to strengthen its position before real difficulties begin to arrive in the Autumn. 

Our free initial consultation for any business owner or director is a great resource for them to get an impartial, professional view of their situation as it is along with a summary of the specific options that they could take advantage of in the short and medium term. 

The time to plan for worsening conditions is before they arrive so that when they do, your company will already have taken the necessary steps to make sure that it can survive and then thrive.

So take a couple of minutes to book your appointment and then start working on your own rescue instead of worrying about it.