What were the main trends?
The first month of Autumn usually sees the first leaves beginning to fall and more surprisingly perhaps, September also saw a fall in the number of business insolvencies being reported following two months of increasing numbers.
The Insolvency Service has released their latest corporate insolvency statistics for the previous month and they saw a total of 1,679 corporate insolvencies – a 13.5% decrease on the previous month’s figures of 1,933 which itself was the third highest monthly total since January 2019.
To give some context, this was still an annual rise of 15.6% from September 2021 and was up 11.3% on the pre-Covid month of September 2019. This is also the seventeenth consecutive month when the number of recorded corporate insolvencies was both over 1,000 and was higher than the corresponding monthly figure from a year ago.
Looking more closely at the 1,679 company insolvencies, we can see some interesting sub plots emerging within the numbers.
Firstly, there were 1,379 Creditor Voluntary Liquidations (CVLs) which make up 82% of the total and remain the majority of cases.
This is an increase of 4% on last September’s total of 1,328 and is 25% higher than the number of CVLs recorded in September 2021 (739).
Last month there were also a total of 204 compulsory liquidations (including winding up petitions) – which was an increase of 54 on the previous month total and a huge 538% increase on the total a year ago.
Additionally there were 85 administrations (5% higher than September 2021) and 11 Company Voluntary Arrangements (CVAs) (8% lower than September 2021).
Even though CVLs fell last month, the increase of compulsory liquidations, the third month in a row they grew and the only insolvency category that increased last month, shows that creditors are continuing to take an aggressive approach to outstanding debts and are willing to use methods such as statutory demands and winding up petitions to either enforce payment or in more extreme cases, force the closure of the business to secure some repayment of the debt.
Administrations and CVAs continue to remain lower than previous months totals underlining how more businesses are choosing or being forced to close through liquidation rather than restructure indicating that many directors are deciding that this is the best method to protect their interests in the short and medium term.
Finally, between June 26 2020 and September 30 2022, there have been a total of 40 insolvency moratoriums obtained in England & Wales and a further 12 companies have had their restructuring plans registered at Companies House.
Scotland
There were 103 company insolvencies recorded for September in Scotland last month.
Although down by two on the previous month’s figures, these were still 47% higher than a year previously and 36% higher than in September 2019.
The total was made up of 69 CVLs (up from 65 in August); 25 compulsory liquidations (down from 38); eight administrations (up from three) and one CVA (up one from zero) with no receivership appointments.
No Scottish companies registered insolvency moratoriums since they were introduced in June 2020 while two have registered their restructuring plans over the same time period.
Traditionally, Scotland has tended to have higher compulsory liquidation rates than other kinds of insolvency but since April 2020, CVLs have been the most common and the Insolvency Service has seen three times as many recorded as other kinds.
Northern Ireland
There were a total of 22 company insolvencies in Northern Ireland in September – up eight from August.
This is double the total from the same month a year ago but down 39% from September 2019.
The total was made up of 18 CVLs (up from 10 last month); two compulsory liquidations (same as August); two CVAs (up from one) and no administrations (down from one) or receivership appointments recorded.
The total number of UK-wide company insolvencies for September 2022 then is 1,804 which is a decrease of 248 on August but an increase of 11 from July.
“Choosing to close their business before that choice is taken away from them”
Commenting on the figures, Christina Fitzgerald, President of R3, the insolvency and restructuring trade body, said:
“The corporate insolvency figures provide a clear insight into insolvencies before, during and after the pandemic.
“The monthly fall in corporate insolvencies is due to a drop in Creditors Voluntary Liquidations, while the year-on-year increase has mainly been caused by a rise in Compulsory Liquidations, which is likely to be due to the end of legislation around winding up petitions.
“The increase in corporate insolvencies between September 2022 and September 2019, on the other hand, is due to a significant increase in the number of Creditors Voluntary Liquidations.
“This is likely to be due to the triple whammy of the withdrawal of Covid support, the economic turbulence and the challenging business climate resulting in directors feeling that they are unable to continue and choosing to close their businesses before that choice is taken away from them.
“Businesses have been operating against a backdrop of real uncertainty in recent weeks and months. A volatile pound, a decline in consumer confidence and lower household spending have led to weaker economic growth, and it seems likely that these conditions will get worse before they get better.
“With living costs rising, both business owners and employees are under significant financial strain as rising costs have meant rising salary demands and increasing pressure on margins, which some businesses haven’t, unfortunately, been able to meet.”
“Sky-rocketing energy bills are also a major challenge. While the recently announced emergency support package will go some way towards mitigating these concerns, it may not provide enough of a safety net.”
Get some professional advice now before the picture changes again
A lot has happened since August’s insolvency stats were released with a “mini” budget and a lot will happen by the time we find out October’s figures too.
If you’re running a business then you don’t have time to wait for economic events to play out – you have to make decisions for the good of your own business now.
The earlier they arrange a convenient conversation, the sooner they can implement important changes to make their business more resilient, robust and ready to navigate the choppy waters ahead.
Or if they decide that their business has no credible way forward then they can help them to close and finalise existing debts as efficiently as possible so they can move onto their next professional challenge.
No matter what they decide to do, the first step is the most important and that is getting in touch to arrange a session.