The latest figures from The Insolvency Service show that the number of company insolvencies in England and Wales is now at the highest rate for eight years. Experts predict that this is just the start of the problem and that more businesses will be forced into closing in the near future.
In the 12 months to August there were 20,512 company insolvencies. This figure is 16% higher than any 12-month period since 2019 and 26% more than any 12 months between 2014 – 2018.
Insolvency figures for September
In September 2022 there were 1,679 registered business insolvencies, which is a rise of 16% compared to September 2021 and 11% higher than in September 2019 (pre-pandemic).
The number of Creditors’ Voluntary Liquidations (CVLs) increased by 4% compared to September 2021 (up to 1,379) and were 25% more than September 2019.
Compulsory liquidations rose by 538% when compared to the same month last year, up to 204, but this figure was 10% lower than three years ago. The number of administrations (85) was up by 5% compared to September 2021, but was 47% down on the September 2019 figure.
Christina Fitzgerald, President of R3, said “The corporate insolvency figures published today 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.”
Help for businesses
There is support available for companies whose financial situation has become precarious. It is always best to try and seek help as soon as possible, rather than leaving it until there is no time left.
As we move into more uncertain economic times, businesses should have plans in place as to how they can mitigate some of the cost increases, in order to prevent the insolvency statistics becoming worse.
Options available to companies that are facing a challenging period include putting together a restructuring plan or entering into a Company Voluntary Agreement (CVA). They may also be able to secure funding from investors that specialise in distressed businesses; though this would involve giving up some of the equity.
If your client is going into administration
Company insolvencies don’t just affect the business involved, there is also a spiral effect that impacts other companies down the supply chain. It’s important for businesses to be aware of the warning signs that could signal a customer is about to enter administration.
This can include keeping up to date with industry news, which will often have rumours circulating about specific companies or the sector as a whole. You can also track credit ratings for certain companies and put alerts in place to warn if they have a County Court Judgment issued against them or there are concerns over their accounts.
An increase in the number of unpaid invoices and excuses regrading late payments can be a key warning sign that something is wrong with the business. In some cases this could just be a staling tactic until the administration process is confirmed.
One of the best methods of protecting your businesses from the risks is to limit the amount of debt individual customers can build up. Consider bringing in debt recovery experts sooner and chase up your late paid invoices to ensure that cashflow problems are kept to a minimum.
At CEA Limited we work with businesses across the country to recover money owed to them quickly and limit any issues from their customers going into administration.
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Speak to our debt collection today on 0113 532 8350 to see how we can help you with your unpaid invoices and credit control.
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