What do the current figures look like in the Insolvency industry?

16% more insolvencies than a year ago. Plus 18% of small businesses have considered closure this year.

The latest Insolvency Service monthly data for Insolvencies (September 2022) shows that there were 16% more insolvencies than in September 2021 and 11% more than the pre-Covid 19 figure for September 2019. Christina Fitzgerald, president of our Insolvency and Restructuring trade body, R3, has commented, that these figures are:

“…likely to be due to the triple whammy of the withdrawal of Covid support, the economic turbulence, and the challenging business climate resulting in directors feeling that they are unable to continue and choosing to close their businesses before that choice is taken away from them.”

In this article, our Licensed Insolvency Practitioners look at some other data that reveals the likely scale of how many financially distressed businesses there are right now.

18% of small businesses have considered closure in the past year

A recent survey of 1,000 small business owners and managers by Purbeck Personal Guarantee Insurance has shown that 18% have considered closing their businesses down in the past year, with rapidly rising costs due to the current economic and political turmoil being the main driver.

The survey also revealed some of the measures that small businesses were having to take in response to the current economic difficulties. These include:

The number of companies in significant financial stress has risen to 610,000

Last week, a report by The Times backed up the Purbeck findings detailed above, suggested that the number of companies in significant financial distress has leapt to 610,000, which represents an 8% increase, year on year, with the conclusion that these firms were having to decide “whether to soldier on or give in”.

There also has been a 25 % jump in the number of companies described as being under more serious stress, such as facing winding-up petitions. Retailers have been particularly affected as the cost-of-living squeeze limits people’s discretionary spending. There was a 72 per cent increase in companies in so-called critical distress in the retail sector, while there was a 36 per cent rise in the leisure and cultural industries. These are areas that our Insolvency Practitioners are experts in and are well equipped to provide independent and timely advice.

With the view that the economy will get worse before it gets better, many company directors are now facing making extremely difficult decisions. In particular, those ‘zombie’ companies that were badly affected by the 2009/2010 credit crunch recession but have managed to soldier on thanks to 10 years of ultra-low interest rates, will be especially threatened by rising interest rate rises, as they will no longer be able to service their debts.

How can Insolvency Practitioners help?

We are here to help companies in financial difficulties to recover and turn things around, whether that is through advisory, restructuring, or refinancing advice or through an insolvency procedure such as an Administration or a Company Voluntary Arrangement, which can deliver the breathing space that companies need to get back on the road to recovery.

If you know or suspect that the underlying position of your business is weak, then act now. Any initial consultation will be free of charge and without obligation. The sooner you contact our Insolvency Practitioners, the sooner we can recommend a solution. We will talk you through all the options available, so that you know exactly where you are, helping you to make the best possible decisions.

If you need our help and advice in any of our specialist insolvency areas, please contact us or call any of our offices, below.

Also, K&W Recovery, trading as Antony Batty and Company, Thames Valley: