Recent figures have revealed that there was a 16% increase in the number of corporate insolvencies in England and Wales in March this year compared with the same month in 2022.
According to the Insolvency Service, registered company insolvencies rose to 2,457 in March, which was an 83% increase on the February 2020 figure, before the Covid-19 pandemic. This was caused by soaring costs and weak consumer spending.
The number of compulsory liquidations more than doubled in March, to 288 and there was a 9% increase in Creditors’ Voluntary Liquidations (CVLs), to 2,011, which is when Directors decide to put their business into liquidation because it is insolvent. The number of administrations and Company Voluntary Arrangements (CVAs) was also higher this year than in March 2022.
Currently, businesses are facing the highest borrowing costs since 2008 after the Bank of England raised its benchmark rate to 4.25%, meaning that struggling firms are having difficulty raising finance or servicing existing debt. In addition, high energy costs pose a significant threat to business stability. It is likely that this situation will get worse before it gets better, with company insolvencies likely to rise in the short term at least.
At 672, bankruptcies also rose in March, but only by two per cent, making them less than half the number of pre-2020 levels. However, the number of Debt Relief Orders (DROs) rose to 3,383 this March, a 35% increase on March 2022’s figure.
In addition, there were 6,100 Individual Voluntary Arrangements (IVAs) registered per month in the three-month period ending March 2023, which is 14% lower than the three-month period ending March 2022.
Since the publication of these worrying figures, there has been an additional update from the Insolvency Service to show that in April the number of companies registered insolvent was 15% lower than the previous year.
The latest data shows that 1,685 companies were registered insolvent in April in England and Wales. Although the number of insolvencies is significantly less than a year earlier, following the big rise in March, they still remain higher than levels seen before the COVID-19 pandemic.
Accountants need to be well-versed in the latest insolvency trends and developments so that they can provide timely and informed advice to their clients or help to signpost them to insolvency practitioners who can offer specialised advice. The current landscape calls for proactive measures to address mounting financial pressures, explore alternative financing options, and evaluate the viability of businesses in light of these challenges. If you or your clients require help during these challenging times, please contact us.
For help and advice on related matters, please contact our Insolvency Partner, Richard Warwick, today.
Source(s): FT, Insolvency Service