According to latest government figures, the number of corporate insolvencies in England and Wales rose by 51% to 2552 during May, to reach a four-year peak. This total was also 40% higher than in May last year and 89% up on May 2019 – before the pandemic. Rapid insolvency growth has been driven by an increase in creditors voluntary liquidations (CVLs), a process whereby companies can effectively opt to jump before they’re pushed, which have already passed a four-year high and more than doubled since May 2019.
Commenting on this data, Fran Henshaw, North West chair of insolvency and restructuring trade body R3, said: “Three years of economic turmoil is taking its toll. The fallout from battling the effects of the pandemic, coupled with rising costs, increased creditor pressure and high inflation, is causing more businesses to turn to an insolvency process to help resolve their financial issues.”
Henshaw, who is also head of corporate recovery and insolvency at Manchester-based accountancy firm Beever and Struthers, added: “More and more directors are running out of time and options, and are choosing to liquidate their businesses before the choice is taken away from them. Firms are operating in a market where people are spending cautiously, costs are increasing and suppliers are chasing debts in an attempt to manage their own cashflow challenges.
“While the summer months might provide some relief from energy costs, interest rates and inflation will continue to create challenges for businesses seeking funding, and could be the tipping point for those which are hanging in there at present. Directors need to remain vigilant for signs of distress, seeking advice if they start to see stock levels increase and cashflow become a problem affecting payment of rent, staff or bills.”