Business insolvencies exceed pre-pandemic levels for first time
The number of business insolvencies has exceeded pre-pandemic levels for the first time since before the first lockdown, according to new figures released today (December 17).
The figures from the Insolvency Service show there were 1,674 business insolvencies in November – 88% higher than the same month last year and 11% higher than in November 2019.
The rise has been driven by an increase in Creditors’ Voluntary Liquidations (CVLs), a procedure where company directors close their business voluntarily, and which now stand at the highest levels in more than two-and-a-half years.
Allan Cadman, a North West insolvency expert who is also regional chair of the insolvency and restructuring trade body R3, said: “The increase in the use of CVLs suggests that a rising number of company directors are choosing to close their businesses, perhaps because they feel that survival is impossible in the current climate.
“Times are tough for businesses in England and Wales as the pandemic continues to take its toll on the economy and the firms that drive it. Over the last few weeks, businesses have been hit by the triple whammy of increased costs, supply chain issues and rising COVID cases.
“They have also been operating in the face of low consumer confidence and anaemic economic growth in recent months, which, coupled with an increasingly difficult COVID situation, has led to changes in people’s shopping and spending habits and taken its toll on revenue levels.”
He added: “It remains to be seen how the introduction of Plan B will affect the economy in the short and medium term, but we know it will affect footfall, spending and operations at a time when many businesses would have been hoping for a busy Christmas period to help after a challenging year.”
Nicola Clark, R&I partner at accountancy firm and business advisor Azets in the North West, said: “Corporate insolvencies are up by 88% compared with November last year, which is unsurprising given all the Government support initiatives that were in place at that time.
Nicola Clark
“However, for the first time since the pandemic began, the number of companies entering a formal insolvency procedure is higher than the same month pre-pandemic, with an increase of 11% compared with November 2019.”
She added: “Businesses have had to start making payments in relation to their BBLS and CBILS, which, together with the end of furlough and the amendment to the restrictions in relation to the presentation of winding up petitions, has put them under increasing financial pressure.
“This, coupled with the uncertainty surrounding what restrictions the Government may reintroduce in the run up to Christmas owing to the new variant, has given many directors pause for thought. This can be seen in the increase in the number of CVLs in November, which account for 90% of the corporate insolvency appointments.
“The relaxing of restrictions in relation to presenting winding up petitions hasn’t yet filtered through to the numbers, with only 50 compulsory liquidations in November – but as we move into the New Year, I expect these to quickly return to pre-pandemic levels.”
