Sharp insolvencies rise warning after government support fades

The number of company insolvencies in February 2023 was 17% higher (1,783) than in the same month in the previous year (1,518) and 33% higher than the number registered three years previously according to monthly government statistics*. There were also 158 compulsory liquidations recorded in February 2023 – more than twice the number compared to the same month a year ago. The number of company insolvencies in Q4 of 2022 was 30% higher than the same quarter in 2021.

For individuals, 580 bankruptcies were registered (3% lower than in February 2022) although the previous month saw 612 bankruptcies were registered, which was 5% higher than in January 2022.

Andrew Athineos, who runs the debt collection agency Athena Collections has over 20 years in debt collection, commercial debt recovery, insolvency and litigation and has seen a big spike in insolvencies, particularly across the construction industry.

Andrew said: “It’s a sad truth that we’re seeing a bleak trend in the number of insolvency cases we’re dealing with. Clearly the cost-of-living crisis, covid, the Ukraine conflict and Brexit have hit industry hard and created a perfect storm of hard times for people and business.

“It is clear from the statistics that since March 2021 there has been a steep and continued increase in voluntary liquidations and it is predicted to continue throughout 2023. There is also a continued increase in compulsory liquidations since January 2022 which shows that creditors patience is being exhausted and ultimately resulting in action being taken.”

Andrew is driven by an ethical debt collection approach and set up Athena Collections in 2017 in order to change how the debt collection industry was perceived. “Let’s be honest, no one wakes up wanting to be a debt collector! However, I found my way into it and I’m a passionate advocate of helping businesses recover money that they are rightfully owed, whilst providing a best-in-class service and trying to equip people with the skills to better manage their finance process.”

Sharing his top tips to help avoid getting into bad debt at a critical time when individuals and businesses are facing exceptional times and feeling the increasing pressure of daily financial management, Andrew added: “I understand that the lifeblood of every household or business is its cash flow. That’s why it’s so important to take action at an early stage to minimise the chances of falling into trouble. Prevention is always better than the cure.”

Insolvency practitioner Steven Illes from MacIntyre Hudson echoed the warning: “The availability of government cash, moratorium on enforcement and the additional legal requirements to petition to wind up a business during Covid resulted in thousands of corporate insolvencies not occurring.  This legacy of poorly performing business along with the current headwinds will only result in the continued high level of corporate failures.  It is expected that over the coming months the number of Compulsory Liquidations will increase as creditors, especially HMRC, continue to issue more Winding Up Petitions.”

Top tips:

  1. Invoicing: Ensure invoices go out on time and consider bringing in your payment terms whilst bearing in mind any impact it could have on your customer
  2. Service: Follow up at least 7 days before the invoice is due to ensure it has been safely received and there are no issues
  3. Terms: If your customer can’t pay in full then agree written payment terms to give you admission in writing
  4. Communication: Keep in constant touch with your customers to monitor the situation. It makes no commercial sense to allow the debt to get bigger
  5. Security: Depending on the size of the transaction, consider asking for additional security in the form of a deposit upfront or personal guarantee
  6. Act fast: Don’t let a debt fester as it will only get worse. If there is a deadlock situation then try and resolve it amicably or seek the services of a 3rd party approach to put some distance between you and the customer
  7. Be confident: Do not make empty threats – be confident in your actions otherwise you lose all credibility and future actions won’t have the desired effect