ICSM Business News: Insolvency Service reveals BIG rise in business failures
The number of company collapses has shot up year on year according to information released by the Insolvency Service for June. The month saw 1,691 company insolvencies in England and Wales, which included: 1,456 creditors’ voluntary liquidations (CVLs); 136 compulsory liquidations; 90 administrations; eight company voluntary arrangements (CVAs), but no receiverships.
The service reported that the numbers of insolvencies was 15% higher than compared to the last pre-pandemic year of June 2019 but 40% up the same month last year. CVLs were 30% higher when compared to June 2021 and 44% higher than in June 2019 while compulsory liquidations were 258% higher than June 2021, but 51% lower than June 2019.
It is also interesting to note that CVAs were 43% lower when compared to June 2021 and 77% lower than June 2019, but administrations were 131% higher than June 2021, but 40% lower than June 2019.
Between 26 June 2020 and 30 June 2022, 39 companies obtained a moratorium and 12 companies had a restructuring plan registered at Companies House – two new procedures created by the Corporate Insolvency and Governance Act 2020.
It seems that the fall-out of the Covid crisis is continuing as firms struggle with debts and can no longer rely on financial support from the Government. The falling number of CVAs may have been caused in part by the restrictions on forfeiture of commercial leases which continue until 25 March 2022. Lucy Trott of Stevens and Bolton commented: “Another explanation for the fall in CVA numbers last year against pre-pandemic levels is the return of Crown Preference, giving HMRC secondary preferential status as an unsecured creditor. Some have speculated whether this has dampened potential enthusiasm for this form of insolvency procedure, as it makes it more difficult to come up with an arrangement that will appeal to other unsecured creditors.”
As for the drop in compulsory liquidations this could be caused by creditors being reluctant to force the issue for fear they will spend time and money on a lost cause. It seems that firms that are in trouble are pulling the plug themselves with a CVL.
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