Leap in business insolvencies as ‘tough start’ to 2023 leads to 52 per cent surge in compulsory liquidations
Corporate insolvencies rose seven per cent year-on-year in January 2023 with the number of compulsory liquidations up over 50 per cent, according to figures released today.
The Insolvency Service said 1,671 companies went insolvent in January 2023, a seven per cent rise on the same month the previous year and 11 per cent when compared to the same month pre-pandemic.
“It’s been an unhappy New Year for businesses in England and Wales,” President of R3 Christina Fitzgerald commented.
“The cost-of-living crisis and ongoing economic issues have meant the traditional new year spike in sales hasn’t happened, and we’ve seen a number of household names enter an insolvency process over the last month in an attempt to resolve their financial issues.”
There were 189 compulsory liquidations, 52 per cent more than in January 2022, but 36 per cent lower than the same period pre-pandemic.
The number of compulsory liquidations remained at historic lows during the pandemic, as wide-ranging restrictions were put on winding up petitions.
Stevens & Bolton insolvency expert Lucy Trott said the increase in compulsory liquidation demonstrates “the current macroeconomic climate is taking its toll”.
“The double bind of HMRC clamping down on historic non-payment of debts, and banks gearing up to pursue fraudulently claimed bounce back loans, means this trend is only set to continue,” Trott continued.
In January this year, there were 1,382 creditors’ voluntary liquidations, two per cent higher than January 2022 and 37 per cent higher than January 2020. CVLs make up the vast majority of corporate insolvencies.
For individuals, 612 bankruptcies were registered in January, which was five per cent higher than in January 2022, but 60 per cent lower than January 2020.
The fact that the number of individual bankruptcies were still significantly below pre-pandemic levels, suggests “the cost-of-living crisis isn’t translating into an increase in the number of people needing this process to resolve their financial distress,” Fitzgerald said.
Last month there were 1,964 company insolvencies, 76 per cent higher than the equivalent pre-pandemic figure.