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Company insolvencies remain below pre-pandemic levels

The number of CVLs in 2021 was only slightly higher than in 2019 and was consistent with the increasing trend in CVL numbers before the coronavirus (COVID-19) pandemic.

The total number of company insolvencies registered in 2021 was 14,048, up from the 12,634 in 2020, but remained below pre-pandemic levels, according to the Insolvency Service.

It revealed one in 304 active companies entered liquidation in 2021. This was an increase from the 29.4 per 10,000 active companies that entered liquidation in 2020, but remained lower than the 41.9 per 10,000 in 2019.

The increase compared to 2020 was driven by the highest annual number of Creditors’ Voluntary Liquidations (CVLs) since 2009. However, the number of CVLs in 2021 was only slightly higher than in 2019 and was consistent with the increasing trend in CVL numbers before the coronavirus (COVID-19) pandemic.

All other types of company insolvencies were reported lower than both 2020 and pre-pandemic levels. The annual number of compulsory liquidations was the lowest since the start of the series in 1960.

Increases in insolvencies were seen across most industries in 2021 compared to 2020. Several sectors showed increases above the overall annual increase of 11%, including Professional, scientific and technical activities (up 35%) and Construction (up 25%).

Beverley Wakefield, co-founder of Derby-based Vibrant Accountancy, said: “The slow increase in company insolvencies last year could soon become a sprint. We’ve had two years of the Government propping up many businesses with cheap loans and furlough, and HMRC being fairly cooperative regarding overdue debts.

“Most of the support has now gone and the Revenue will soon stop playing Mr Nice. Businesses are now having to stand up on their own two feet and many are already starting to wobble. A growing number of businesses are tied up in knots with debt, especially those who didn’t take control of their cashflow and overheads during the pandemic.”

She added: “I expect the relatively benign level of company insolvencies to spring back with a vengeance if businesses aren’t supported enough in 2022. We are now entering the business end of the pandemic and many businesses, without further support and rigorous oversight of costs, will not survive.”

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