A huge rise in compulsory company liquidations is being driven by creditors who are fed up with unpaid debts, a leading South West expert says.
Figures published by the Insolvency Service reveal an increase of 105.8% in corporate insolvencies compared to this time in 2021, and an increase of 3.4% when compared to pre-pandemic levels.
Corporate insolvencies increased by 4.8% in January 2022 to a total of 1,560 compared to December’s total of 1,488. January 2021’s figure was 758 and January 2020’s was 1,508.
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Charlotte May, chair of insolvency and restructuring trade body R3 in the South West, said: “The increase in corporate insolvencies is being driven by a rise in compulsory liquidations, which were 131.4% higher than this time last year.
“This suggests that creditors are now starting to take action over unpaid debt, having been legally prevented from doing so since the start of the pandemic.
“Numbers of Creditors’ Voluntary Liquidations have remained similar compared to this time last month, which suggests that many company directors are continuing to choose to close their businesses rather than attempting to carry on trading in the current climate.”
She added: “The figures published today highlight the toll the current business climate is taking on firms in the South West. Over the past two months, businesses have had to trade through a perfect storm of issues which will have affected them and their income.
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“They’ve battled a myriad of factors including new Covid measures, a slowdown in consumer spending, and rising inflation, with steep increases in energy prices a particular pinch-point. All of these will have taken a toll.
“After nearly two years of trading through a pandemic, these factors may increasingly become too difficult for many directors to deal with.
“Against a backdrop of continued pandemic-related uncertainty, there is likely to be a significant number of directors who will be increasingly doubtful that their business can survive much longer.”
Meanwhile, the Insolvency Service also revealed that personal insolvencies have seen a slight month-on-month increase, and have increased by 1.8% when compared to January 2021, driven by an increase in bankruptcies.
Personal insolvencies increased by 0.3% to 8,477 in January 2022 compared to 8,451 in December 2021. January 2021's figure was 8,331.
Ms May said: “When it comes to personal insolvencies, the slight increase we’ve seen in the figures published today is being driven by a rise in the number of people entering a bankruptcy over the last month, and suggests that more people are unable to pay their debts and are turning to this process to return to a more even financial keel.
“The figures reflect the ongoing toll the pandemic is taking on personal finances. People in the South West are worried about how rising costs across the board will affect them, particularly energy prices, so it’s no wonder that people are worrying more about money.”
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She added: “We would urge anyone concerned about their finances – whether those are business or personal ones – to seek advice about their situation as soon as possible.
“Talking about your money worries is incredibly tough, but having a conversation about your concerns as early as possible will give you more potential options, more time to make a decision, and a greater chance of improving your situation than if you’d waited until it worsened. Many R3 members will give an hour’s free consultation to people who are in this position, so they can understand more about their situation and outline the options that are open to them for resolving it.”
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