Business insolvencies hit record highs
The number of businesses going into liquidation has been climbing steadily since late 2022 and have hit record high levels this year – even more so than during the pandemic. But, what is it that is driving this rise in insolvency?
Latest numbers of business going into liquidation
According to the latest figures from the Insolvency Service, businesses going bust during March 2023 in England and Wales stood at 2,457, which was 16% higher than in the same month of the previous year.
Comparing these numbers to insolvencies during the Covid-19 pandemic, there were just 992 insolvencies in March 2021 - 20% lower than the number of insolvencies registered in March 2020 and 37% fewer than in the two years previously, in March 2019. In percentage terms, insolvencies in March 2023 were 160% higher compared to mid-pandemic, when you might expect there to be hundreds more casualties as businesses buckled under the pressure of prolonged closures.
What’s the reason busines are going into liquidation
Looking into the figures in more detail, of the 2,457 business insolvencies in March 2023, 2,011 were Creditor’s Voluntary Liquidations (CVLs) - a number that has climbed 16% since March 2022. A CVL is an arrangement that liquifies a company’s assets under the guidance of a licensed insolvency practitioner (IP), as a way to pay back the company’s creditors.
It might seem strange to voluntarily put your company into administration, but, if you owe more than you are billing, i.e. you become insolvent, you have a legal responsibility to ensure you do all in your power to protect outstanding creditors once you know your company is insolvent. That means placing their interests above those of your own, your fellow directors, colleagues or staff.
Why now are business going into liquidation?
The reason for the sharp increase in CVLs is not known, but many industry IPs suspect that now that we’re the other side of the pandemic, businesses hopeful of a “return to normal” were instead greeted with high interest rates and a cost of living crisis, and are therefore shutting up shop before they are forced to.
There’s also a chance that many companies were put off going into insolvency as they hung on to government support during the pandemic, which have now run out. It’s also looking likely that insolvency figures may continue to increase until the market settles down a bit.
If you would like some advice about your own insolvency situation, contact Downs Solicitors to see how we can help.