Business Insolvencies Soar to 13 Year High

Business Insolvencies Soar to 13 Year High

It’s a scary title, we know but this quarter, we are now seeing business insolvencies at a 13 Year high. Thanks to the cost of living crisis and the ever-increasing interest rates, businesses are unable to pay their debts or have more liabilities than assets. It’s not been a great start to 2023!

While business recovery is hoped for, sometimes liquidation is the only option.

When a company enters liquidation it can take 3 months to a year due to factors like appointing a liquidator, selling assets, and agreeing on claims. Sadly, there's no legal time limit. Which just gives you more added stress

Why are insolvencies so high? Let’s look at the numbers.

The last quarter of 2022 saw a 30% increase in the number of insolvencies from the same period in the previous year, as government support schemes came to an end.

The Insolvency Service's released figures that showed 5,995 registered company insolvencies occurred between 1 October and 31 December 2022.

Experts predict high liquidation numbers to continue for the next six months. The number of company insolvencies in Q4 2022 was 7% higher than in Q3 2022 and 30% higher than in Q4 2021, following seasonal adjustment.

The number of individual insolvencies also rose by 6% from Q3 2022 and 7% from Q4 2021, with 29,589 (seasonally adjusted) individual insolvencies recorded in Q4 2022.

What are businesses struggling with?

You may not have guessed it but Covid can be a big factor in this. For example, businesses that received support during COVID are no longer able to survive with businesses experiencing supply chain issues, payment issues with staff or suppliers and struggles with cash flow.

However, according to recent data, personal insolvencies in 2022 rose to their highest levels in three years due to more individuals opting for individual voluntary arrangements and debt relief orders.

Conversely, the number of bankruptcies was at a 10-year low, so more people are seeking arrangements with their creditors earlier.

Dealing with Insolvencies 

If your company has unpaid debts, creditors may resort to obtaining a court judgment or issuing a statutory demand to recover the debt. For those of you who have seen ‘Can’t Pay, We’ll Take It Away’, this is something you want to avoid.

In such a case, you may take certain measures to safeguard your company from compulsory liquidation, which would force it to shut down.

The sad truth is that sometimes there’s no option but to put your company into some sort of recovery position. Acumenica are in partnership with one of the UK’s leading insolvency practitioners who can help if your company requires urgent and unavoidable legal redress, such as liquidation or administration. Remember that liquidation needn’t be the end of your business. In most circumstances, it is perfectly possible to carry on that business into a new company.

However, for this to be a viable option, it’s better that the company appoints an insolvency practitioner than a creditor - although you’ll need to pay the IP, it does give you more control over what will happen.

The importance of acting quickly

Simply get in touch with us, you can call us today on 0333 016 6559 or head over to our contact us page.