Company insolvencies rise 32% in December

There were 1,964 company insolvencies in December 2022, up 32% compared with December 2021 (1,489) and 76% higher than the number registered three years previously, according to the latest figures from the Insolvency Service.

It found there were 183 compulsory liquidations in December 2022, more than three and a half times as many as in December 2021 and 8% higher than in December 2019.

Numbers of compulsory liquidations have increased from historical lows seen during the coronavirus pandemic, partly as a result of an increase in winding-up petitions presented by HMRC.

There were 1,979 Debt Relief Orders (DROs) in December 2022, which was 6% higher than December 2021 but 5% lower than the pre-pandemic comparison month (December 2019).

It also found that on average, 7,233 Individual Voluntary Arrangements (IVAs) were registered per month in the three-month period ending December 2022, which is 9% higher than the three-month period ending December 2021, and 26% higher than the three-month period ending December 2019.

IVA numbers also ranged from around 6,300 to 7,800 per month over the past year.

Meanwhile, there were 4,803 Breathing Space registrations in December 2022, which is 14% higher than the number registered in December 2021. 4,691 were Standard breathing space registrations, which is 15% higher than in December 2021, and 112 were Mental Health breathing space registrations, which is 8% higher than the number in December 2021.

Commenting on the figures, Colin Haig, partner and head of Restructuring at Azets, said: “It’s inevitable that failure statistics will uptick regularly in UK but that’s not the whole story. There is still a prize for management in consulting and contemplating options with advisors at the opening stages of the demise curve. The more constructive options of air cover via a moratorium or a restructuring plan are viable for businesses that consult early.

“Unfortunately, too many management teams are not facing problems early enough and when the decline accelerates often an insolvent liquidation is the only option. That’s not a great option because it’s an end-of-life process for the business.”

He added: “It’s strange to say it but an uptick in administrations, particularly where the process has been used as the structure for a pre-packaged sale, is a much better sign of the UK’s economic resilience than an uptick in compulsory liquidations.

“For advisors, if a client is not paying your bill, sending them to Coventry is not the smart option. It’s likely symptomatic of an issue and the client probably needs your help more than ever.”