The Insolvency Service said the number of registered company insolvencies was 1,515 in February, compared to 685 for the same month last year and 1,346 pre-pandemic. The surge was driven by 1,329 Creditors’ Voluntary Liquidations, more than double the number in February 2021, and 40 percent higher than in February 2020. CVLs are where directors of a distressed business voluntarily put it into liquidation in order to pay off its debts.
Additionally, 109 of the corporate insolvencies in February were administrations, which is 95 percent higher than the same month in 2021, while compulsory liquidations shot up 124 percent.
Christina Fitzgerald, vice president of insolvency and restructuring trade body R3, warned that the level of insolvencies could get even worse, given rising energy costs and the impending removal of Government coronavirus protections for companies against creditors.
She said: “Consumer spending has declined and consumer confidence is low as people worry about the economy and their own financial position, with inflation now a real problem for firms and individuals alike. This situation is unlikely to improve any time soon given the impact the war in Ukraine will have on energy costs.
“In addition to this, the restrictions on using winding up petitions are coming to an end later this month – something which could see an increase in creditors turning to legal action to recover unpaid debts.”
Martin McTague, the Federation of Small Businesses national chairman, agreed and said Chancellor Rishi Sunak needs to provide more help to businesses in his Spring Statement next week.
“All eyes now are on the forthcoming Spring Statement,” he said.
“With national insurance rises due to ratchet up the pressure on firms, and with energy, fuel, input and operating costs spiralling and with inflation at its highest level for four decades, small businesses need all the help they can get.”