How is Insolvency stacking up year-on-year?

There were 4,896 company insolvencies in the first quarter of 2022, according to the latest data from the Insolvency Service.

This number was six percent higher than in the fourth quarter of 2021, and 112% higher than in the first quarter of 2021. The number of creditors’ voluntary liquidations (CVLs), meanwhile, increased to the highest quarterly level since the start of the series in 1960.

This year-on-year increase coincided with the phasing out of measures put in place to support businesses during the pandemic. An example of this was the fact that the support provided through furlough decreased at the start of July 2021, with the scheme coming to an end on 30 September 2021.  In addition to this, the suspension of wrongful trading liability - which allowed directors to continue trading without the threat of personal liability - ended on 30 June 2021. 

The first quarter of 2022 also saw an increase in the number of compulsory liquidations, with this being 114% higher than in the fourth quarter of 2021 and 183% higher than in the first quarter of 2021. However, these numbers remained lower than pre-pandemic levels.

These lower than pre-pandemic figures are likely to have been partly driven by, according to the Insolvency Service, the government’s fiscal measures and other measures that were put in place to support businesses and individuals. This included a temporary restriction on the use of statutory demands and certain winding-up petitions. 

As for the number of administrations in the first quarter of 2022, this was similar to the final quarter of 2021, and 42% higher than the number in the same quarter of 2021. The number of company voluntary arrangements, however, were 24% lower than the fourth quarter of 2021, with there being a 32% year-on-year decrease. 

Looking at the figures as a whole, CVLs were the most common type of company insolvency, being seen in 87% of cases. This is followed by compulsory liquidations - making up seven percent of cases, while administrations took up five percent of cases and CVAs made up one percent of cases. 

The Insolvency Service release also looked at the number of companies that have entered liquidation over the past 12 months. It found that one in 257 active companies - at a rate of 38.9 per 10,000 active companies - entered liquidation between 1 April 2021 and 31 March 2022. 

The statistics are alarming, but if you seek help and advice early, there are potentially often more options available.

If you are facing financial difficulties personally, or within business, please do contact us at [email protected] and have that conversation.