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May insolvency figures reflect uncertain outlook

Insolvency figures for May 2022 were published by the Insolvency Service on 17 June, and reveal an increase in corporate insolvencies both compared to pandemic and pre-pandemic levels.

The total number of corporate insolvencies in May was 1,817. This figure is 79% higher than for May 2021, and 34% higher than the number registered pre-pandemic in May 2019. The number has dropped slightly from the peak seen in March this year (2,119 corporate insolvencies), which was driven by the final lifting of restrictions on winding-up petitions on 31 March. However, given that the economic outlook has significantly worsened even since March, it seems that a continuation of the downward slope is unlikely.

Reflecting recent trends, the total is comprised overwhelmingly of a large number of creditors' voluntary liquidations (CVLs), which account for 1,584 of the total - 66% higher than the equivalent figure for May 2019. Directors may be opting to go down the CVL route to avoid the risk of personal liability. It appears this could be reducing the need for creditor action, as the number of compulsory liquidations remains 50% lower than in May 2019.

The relatively low number of administrations (84) may sadly reflect the fact that many businesses, having clung on throughout the pandemic in the hope of a strong recovery, are now incapable of rescue.

Although monthly figures for the new moratorium under Part A1 of the Insolvency Act 1986 are not released, the Insolvency Service states that 38 moratoriums have been obtained since the procedure was introduced on 26 June 2020. This new procedure has had a slow start, but may become increasingly useful to essentially solvent businesses needing a breathing space to consider their cash flow options.

The increase in company insolvencies was driven by an increase in the number of CVLs, which were 66% higher than in May 2019 and 70% higher than in May 2021.

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restructuring and insolvency

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