Insolvencies in England and Wales are at their highest in 60 years

Voluntary insolvencies are at their highest in 60 years according to the Insolvency Service.

As the impacts of several external factors conspire, the Insolvency Service reported that company insolvencies neared 5,000 in the first quarter of 2022; more than twice that of the first quarter of 2021 and the highest since records began in 1960.

Supply chain and staffing issues

A labour shortage has left some businesses and their supply chains understaffed and unable to acquire the resources needed to produce goods or deliver services. This knock-on effect, coupled with additional checks and red tape surrounding exports and imports required after Brexit, means that some businesses cannot operate as they once did, with some even collapsing under the added strain.

Increased outgoings

It’s no secret that energy prices have skyrocketed in the last few months, with the previously mentioned issues in the global supply chain contributing to the price hike. The Russian war has exacerbated matters further, resulting in a hike in gas prices and worsening the ongoing global energy crisis.

This has had a knock-on effect on the price of consumer goods, and the public is having to make cutbacks on their weekly shopping budget and heating their homes, among other things.

Even giants like Netflix are feeling the pinch as people tighten their belts, with subscribers dropping the service in droves.

Lingering coronavirus effects

Although some of the global issues previously mentioned have ousted COVID-19 from the front-page monopoly it’s held since 2020, some businesses continue to struggle in the pandemic’s aftermath.

Aside from the Recovery Loan Scheme, all government financial support schemes (Bounce Back Loans and Coronavirus Business Interruption Loans) have been withdrawn. Businesses once relying on them are finding it difficult to keep their cash flow balanced and pay their liabilities on time, with some falling into insolvency.

Even with relative normality returning and the relaxation of the last restrictions, the previously mentioned rise in the cost of living means people are having to be more careful about how much they spend, meaning a lot of businesses offering non-essential goods and services are still losing out.

Is help available?

Fortunately, help is available for companies struggling to repay their debts. If you find your business is unable to cover its liabilities when they fall due, you should seek advice from a firm of licensed insolvency practitioners as soon as possible. Speak to us for free, impartial advice with no obligation. Depending on your circumstances, we can offer a range of solutions.

• Repay the unsecured debt in instalments
  If most of the company’s debts are unsecured, and the business would be viable without those debts, the company may be able to repay those debts in more affordable monthly instalments. This process is called a Company Voluntary Arrangement (CVA). They usually last five years, and once the arrangement concludes, the remaining unsecured debt is written off. Creditors could receive a higher return from a CVA than they would from the company’s closure. A CVA must be carried out by a licensed insolvency practitioner.
  More on Company Voluntary Arrangements (CVA)
• Restructure the company
  If repayment alone won’t be sufficient to clear the company’s debts, you could explore administration as an alternative way forward. Administration involves a licensed insolvency practitioner taking control of the company as Administrator. They will then make the necessary changes to make the company appealing to potential buyers.
  More on administration
• Close the company
  If the company’s debts are of such a level that repaying them or recovery isn’t a viable option, you may be better off closing the company through voluntary liquidation. Entering a Creditors Voluntary Liquidation (CVL) allows you to control the entry into liquidation and draws a line under the debt by closing the insolvent limited company. If the debts are of such a level and you don’t voluntarily put the company into liquidation, your creditors could file a winding-up petition, forcing the company into compulsory liquidation.
  More on Creditors Voluntary Liquidation (CVL)

Summary

Factors relating to the lingering COVID pandemic, a rise in the cost of living, the ongoing energy crisis, and the effects of Brexit have contributed to the increase of company insolvencies and meaning voluntary insolvencies are at their highest since records began in 1960. With the last of the government’s COVID financial support schemes ending, more companies are finding it harder to keep going as additional economic challenges mount, pushing more and more into insolvency.

Fortunately, there are ways to alleviate your company’s debts, and which solution is best suited to your company will largely depend on its circumstances. Speak to us today for free, impartial, non-obligatory advice for insolvent limited companies and individuals. Take decisive action now to limit the damage later.