Business insolvencies jump 30% as 22,000 firms go bust in 2022
Business insolvencies jumped 30% to a 13-year high in 2022 as government support programmes that offered companies protection from their creditors during the pandemic came to an end.
Soaring costs and weakening consumer demand in the second half of last year also combined to force many firms into liquidation, said analysts who predicted the situation was likely to worsen as the UK economy moves into recession this year.
The total number of company insolvencies registered in England and Wales reached 22,109, according to official data, which was the highest since the recession in 2009 that followed the financial crash, and 57% higher than 2021.
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Christina Fitzgerald, the president of R3, the insolvency and restructuring trade body, said 2022 “was the year the insolvency dam burst”.
Tens of thousands of small and medium-sized firms are also believed to have called time on their businesses last year and shut down before they became insolvent, adding to the total number that stopped trading.
Fitzgerald, who is a partner at the law firm Edwin Coe, said many of the businesses included in the official figures left it too late to pay off their creditors before closing down.
“After nearly three years of trading through a pandemic, and in the face of the end of government support, rising costs and a cost of living crisis, many directors simply ran out of road this year and chose to close their businesses before the choice was taken away from them.
“This was mainly due to creditors’ voluntary liquidations reaching their highest level in 62 years as more and more directors turned to this process to close down their businesses,” she added.
Samantha Keen, a partner at EY-Parthenon and president of the Insolvency Practitioners Association, said supply chain pressures, rising inflation and high energy prices have created a “trilemma” of headwinds.
“This stress is now deepening and spreading to all sectors of the economy as falling confidence affects investment decisions, contract renewals and access to credit,” she said.
The firm’s latest profit warnings report found the number of UK-listed companies signalling that they expect a drop in profits increased 50% year on year.
Personal insolvencies reached their highest level for three years after an increasing number of people turned to individual voluntary arrangements (IVAs) to repay some or all of their debts.
The total number of individual insolvencies was 118,850, the government’s Insolvency Service said, which was higher than the 110,045 registered in 2021, but slightly lower than the 122,150 registered in 2019.
Fitzgerald said the move away from bankruptcies to agreed repayment methods such as IVAs was significant and suggested people in financial trouble were seeking help at an earlier stage.