Bath Business Blog: Claire Burden, advisory consulting partner, Tilney Smith & Williamson. Insolvencies are back and rising fast

October 21, 2021

The monthly insolvency statistics published by The Insolvency Service for September show the number of registered company insolvencies were at their highest since the start of the first UK lockdown in March 2020.

This is effectively a rebalancing back to normalised insolvency levels across the economy, after the government support measures during the Covid pandemic. 

Total company insolvencies in England and Wales in September were 56% higher than September 2020 and overall are now close to pre-pandemic levels (September 2021 numbers were 4% lower than the numbers registered in September 2019).

The statistics will include some high-profile energy businesses, due to the high cost of gas. We expect this energy cost issue to reverberate into additional sectors, including manufacturing, consumer products and others, and cause further failures when combined with existing pressures of increased transport costs and supply issues.

The number of Creditors’ Voluntary Liquidations (CVLs) in England and Wales were 80% higher than in September 2020 and 21% higher than in September 2019.

This is mainly driven by the large number of small businesses that are going insolvent, where directors are instigating CVLs and there are limited options to sell as a going concern.

The number of compulsory liquidations and bankruptcies have continued to be lower than 2020 or 2019 averages, partly driven by furlough schemes, protection for tenants and low interest rates.

However, we expect this trend to reverse steadily in the coming months and going into the new year, with the ending of the furlough scheme in September and commercial tenant protections by March 2022.

A third of the UK’s small businesses have been classified as highly indebted as per a recent Bank of England report, alongside its quarterly financial stability update.

The analysis showed that 33% of SMEs held debt levels of more than 10 times their cash balances, versus 14% before Covid-19.

In this continuing volatile environment, SMEs need to focus on cashflow plans, including repayment of Covid loans, HMRC arrears and rising operating and product costs alongside repaying debt that was in place pre-pandemic.

As always, businesses can avoid insolvency if they seek advice early enough.


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