The latest Government insolvency statistics for 2022 show a significant increase in the number of companies in distress. The total number of company insolvencies registered in 2022 was 22,109, which was the highest number since 2009 and 57% higher than 2021. The number of CVLs in 2022 was the highest annual number in the time series since records began in 1960. Compulsory liquidations and the number of administrations were higher than 2021 but remained lower than pre-pandemic levels.

Quarterly insolvency statistics for October to December (Q4) 2022 show that there were 5995 company insolvencies registered in Q4 2022, which was the highest total since Q4 2008. This was 30% higher than during the same quarter in the previous year and 7% higher than in the previous quarter (Q3 2022).

Industry view

The three industries that experienced the highest number of insolvencies in 2022 were:

Construction (4,143, 19% of cases where industry-type was available);

Wholesale and retail trade; repair of motor vehicles and motorcycles (3,263, 15%);

Accommodation and food service activities (2,704, 12%);

These were also the three sectors with the most insolvencies in the 12 months ending Q3 2021.

Leading restructuring and insolvency professional Oliver Collinge from PKF GM said:

“The large rise in corporate insolvency numbers is not surprising nor the industry sectors most impacted, given the cost of living crisis. Many distressed businesses managed to keep afloat through Covid by using the high level of government support available. Many businesses are still repaying BBLS or CBILS loans and HMRC liabilities deferred during the pandemic; rising input costs are adding to these cash flow pressures.”

Challenging times ahead as cash flow pressure on businesses grows and even better-performing businesses won’t be immune

Oliver continued:

“The current headwinds will create challenges even for some better-performing businesses in 2023, not only those that were already in survival mode. The IMF predicts that the UK will be the worst performing of the big economies in 2023 and a combination of working capital and supply chain challenges together with the cost of living crisis and rising interest rates means that the pressure on cash will continue. Unfortunately, we expect to see heightened levels of business failures for some time to come.”

“It’s critical businesses act early and seek advice if they are struggling now or think cash flow may be squeezed in the coming months. The earlier they act, the more options they’ll have to secure the business’s long-term survival.”

The rise and rise of Creditors’ Voluntary Liquidations (CVLs)

In 2022, CVLs increased by 49% from 2021 to the highest annual number since the start of the time series in 1960. They accounted for 85% of all company insolvencies.

In Q4 2022, CVLs accounted for 82% of all company insolvencies.

CVLs are where directors have chosen to place their business into an insolvency process. PKF GM thinks this may partly be because creditors can now take enforcement action, forcing directors to take pre-emptive action. There is also significant anecdotal evidence that many of these liquidations involve small companies which had taken out Bounce Back Loans and are now unable to repay them.

By Brian