January 2022 saw yet another rise in the number of corporate insolvencies, as UK companies continue to face a number of challenges on the back of the Covid-19 pandemic.
According to recently published Government data, 1,560 company insolvencies were registered in January 2022, more than double the number in the January 2021 (758). This figure is up 4.8% from 1,488 in December 2021, but similar to pre-pandemic levels, with 1,508 reported two years previously in January 2020.
January 2022 also saw a significant increase in Creditors’ Voluntary Liquidations (CVLs), with 1,358 recorded, more than double than in January 2021 (631), and 34% higher than in January 2020 (1,012).
Further statistics released by the Insolvency Service, highlighted that in January 2022 118 Compulsory Liquidations were registered, an extremely significant increase of 131% in comparison to that of January 2021 (51). However, these statistics are considerably lower than figures released before the pandemic, 317 and 295 in January 2019 and 2020 respectively.
Businesses have battled a perfect storm of issues
Commenting on the continuing rise of business closures, Christina Fitzgerald, Vice President of insolvency and restructuring trade body R3 said “The figures highlight the toll the current business climate is taking on firms in England and Wales. Over the last two months, businesses have had to trade through a perfect storm of issues which will have affected them and their income.”
Dean Nelson, Head of Business Recovery and Insolvency at PKF Smith Cooper added:
“Navigating ever-changing Covid measures, surging inflation and a decline in consumer spending has created increasingly challenging trading conditions for many businesses.”
“The arrival of the Omicron variant further shattered hopes for retailers over the Christmas period, as shoppers adopted a more cautious approach, leading to a 3.7% monthly drop in retail sales. Although Covid measures are now being eased across the UK, spending habits may remain prudent as consumers contend with higher taxes and soaring energy bills.”
“After almost two years these factors will have taken a significant toll on many businesses, and we’re seeing a considerable number of directors question whether they can continue to operate.”
The volume of insolvencies fell sharply during 2020 as the Government introduced temporary support measures to help businesses continue to trade during the pandemic. However, insolvencies are likely to increase significantly as support measures unwind, and pressure on cash flow facilities will be increased by the demand for repayment of Government-backed loans.
Take early action to alleviate financial difficulty
Prevention is always better than cure when it comes to financial difficulty.
If your business is currently facing financial pressures, there are options available that can be tailored to alleviate or mitigate situations and restructure existing debt, but the sooner you act, the more options you’ll have available to help you get your business back on track.
At PKF Smith Cooper, our experts understand that seeking help at the earliest opportunity is essential to help mitigate the long-term impact of financial difficulty.
If you’d like to discuss your current situation further, or have any concerns regarding the health of your business or personal finances, please do not hesitate to get in touch.