Company insolvencies hit 13 year high

The number of registered company insolvencies between 1 October and 31 December 2022 (Q4 2022) was 5,995 (seasonally adjusted) according to figures released today.

These insolvencies comprise 4,891 creditors’ voluntary liquidations (CVLs), 720 compulsory liquidations, 359 administrations and 25 company voluntary arrangements (CVAs). There were no receivership appointments.

After seasonal adjustment, the number of company insolvencies in Q4 2022 was 7% higher than in Q3 2022 and 30% higher than in Q4 2021. The number of CVLs remained close to the highest quarterly level since the start of the series in 1960 (Q2 2022).

The number of compulsory liquidations also increased to the highest quarterly number since the start of the coronavirus (COVID-19) pandemic, partly as a result of an increase in winding-up petitions presented by HMRC and due to a high number of petitions from a single bank.

Commenting on the latest figures, Gareth Harris, partner at RSM UK Restructuring Advisory,said: ‘These Q4 insolvency numbers have confirmed that the “excess insolvencies” which have been put off by the Government Covid support packages are now in free flow.  We expect these high liquidation numbers to continue for a couple more quarters before slowly tailing off as the recession softens.

‘But, the next 6 months may be the toughest for UK business since the early 1990s as almost all economic indicators paint a gloomy picture and survival will represent success for many.  This will however create opportunity for those strong businesses who may be able to capitalise if they can move quickly.’

Figures released today also show the number of individual insolvencies in Q4 2022 was 6% higher than Q3 2022, and 7% higher than in Q4 2021.

In Q4 2022, there were 29,589 (seasonally adjusted) individual insolvencies, comprising 21,865 Individual Voluntary Arrangements (IVAs), 6,142 Debt Relief Orders (DROs) and 1,582 bankruptcies.

Commenting on the latest figures, Andy Nalliah, personal insolvency partner at RSM UK, provided a word of caution on the volume of IVAs: ‘The rise in interest rates and the costs of living show little sign of slowing and for debtors whose discretionary funds are already depleted and whose savings are exhausted, the risk of failing to service their ongoing costs and expenses together with any IVA commitments remains very real and may only increase.’

Today’s figures also show the lowest quarterly numbers on record for bankruptcy cases, with an 8% quarter on quarter decrease (1,582 bankruptcies in Q4 2022).

Andy Nalliah added: ‘The downward trend of the last two years continued for bankruptcy numbers.  I expect they are likely to remain low for the next few months as many debtors will endeavour to reach agreement with their creditors to avoid bankruptcy, and those with minimal assets can also avoid the bankruptcy process if they qualify for and enter a DRO.’