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Monthly insolvencies more than double year-on-year, data finds

Claire Burden, partner at Tilney Smith and Williamson, said businesses that ‘thrived’ under the pandemic are now at risk. Online low-cost retail businesses are now being put under ‘considerable pressure’ as they struggle to pass price increases onto customers for ‘fear’ of high volume demand falling away.

The number of registered company insolvencies in January 2022 was 1,560, more than double the number registered in the same month in the previous year (758 in January 2021).

The latest insolvency statistics from the Insolvency Service also revealed that in January 2022 there were 1,358 creditors’ voluntary liquidations (CVLs), more than double the number in January 2021, and 34% higher than in January 2020.

Numbers for other types of company insolvencies, such as compulsory liquidations, remained lower than before the pandemic, although there were more than twice as many compulsory liquidations as in January 2021.

Claire Burden, partner at Tilney Smith and Williamson, said: “As the western world moves out of the pandemic, we are starting to see several macro-economic factors causing distress in businesses in the UK – primarily driven by global inflationary trends and also continued supply chain disruptions and raw material and commodity shortages.

“Sectors that are most vulnerable to all of these at the same time – such as construction, manufacturing and technology will be the most impacted. It may not be easy for SMEs to be able to pass cost increases onto the consumer, leading to short-term liquidity pressures and longer term distress.”

She added: “Businesses that thrived under the pandemic are now at risk – for example online low-cost retail businesses are now being put under considerable pressure as they struggle to pass price increases onto customers for fear of high volume demand falling away.”

“While this may not lead to insolvencies, businesses should evaluate various forms of accessible finance to manage these short-term risks. While optimising working capital cycles is a great way to release cash, other solutions could include borrowing against assets, raising project finance or seeking long-term debt.”

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