RECORD LIQUIDATIONS A WARNING TO COMPANY OWNERS

Last Updated on: 22nd November 2023, 07:41 pm

Record numbers of company liquidations should serve as a warning to business owners bracing for a recession to act early, according to one of the country’s leading restructuring and insolvency (R&I) advisors.

Latest quarterly insolvency statistics for October to December 2022 (Q4), reveal the total number of company insolvencies registered in 2022 was 22,109 – the highest number since 2009 and 57% higher than 2021.

Robert Young, R&I Director at Azets, the UK Top 10 accountancy firm expects insolvencies to keep rising throughout 2023 but is urging companies to seek help before an ‘end-of-life’ liquidation becomes the only option.

The liquidation rate in 2022 was the highest since Q3 2015, with one in 202 active companies (at a rate of 49.5 per 10,000 active companies) entered insolvent liquidation in 2022. This is higher than the previous year (2021: 32.9 per 10,000 active companies) and pre-pandemic levels (2019: 41.9 per 10,000).

Of the 5,995 registered company insolvencies on Q4 2022, there were 4,891 CVLs, 720 compulsory liquidations, 359 administrations and 25 company voluntary arrangements (CVAs).

The annual number of Creditors’ Voluntary Liquidations (CVLs) in 2022 is the highest on record, approximately 21% higher than if the pre-pandemic trend had continued.

Robert Young said: “The IMF predicts that the UK will be the worst performing of the big economies in 2023. The alarming statistics and gloomy outlook are driven by a perfect storm of working capital and supply chain pressures, as well as rising interest rates and reducing consumer confidence. Business leaders must remain alive to the pressures and must manage their finances – and their stakeholders – very closely.

“In times of economic decline, we expect to see the number of insolvencies increasing. However, it is the number of liquidations that is of particular concern as this highlights the high number of businesses ceasing to trade. Liquidation is an end-of-life process and should be avoided at all costs, as this is very rarely of benefit to the creditors and employees.

“Spotting the warning signs and seeking early advice is absolutely crucial as this will ensure that the widest range of options is available and will maximise the chances of survival.”

 

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