The latest figures from the Insolvency Service show that excluding one-off ‘bulk insolvency events’, there were 17,196 corporate insolvencies in 2019, the highest number since 2013.
In addition, the number of insolvencies for the last quarter of the year rose by 8.1 per cent compared to Q4 2018.
The figures paint a picture of job losses, little or no growth, lack of investment and higher costs for business owners due to rises in minimum and living wage rates and increased employer contributions to auto-enrolment.
Meanwhile, in addition to the firms that went bust, separate research shows that almost 500,000 businesses in the UK are in ‘significant distress’, the highest number on record, with younger firms more likely to have issues than those formed before 2014.
In turbulent and economic times, firms can find themselves in the position of not being able to pay their debts for a number of reasons, some of which might be no fault of their own, such as being paid late or not at all. However, there are ways for a business to stay afloat, particularly if it is experiencing only temporary financial difficulties.
For example, they could take out a company voluntary agreement (CVA), which is a binding agreement between the insolvent business and its creditors that involves the payment of all or part of its debts over an agreed period.
To obtain a CVA, the Directors will need to explain how the business got into distress and offer a reduced payment plan, which creditors vote on. Most creditors approve a CVA, as they would prefer to receive something than nothing
Another option would be for the firm to hand itself over to an administrator, as while the administrator is in control, creditors cannot take legal action against the firm to recover their debts or begin liquidation proceedings without court approval.
For help and advice on matters relating to insolvency, contact our expert team at Milsted Langdon today.