The number of companies going bust is set to increase as government support measures wear off.
According to government figures, the total number of company insolvencies across all sectors in England and Wales last year was 14,048. That’s just over 11% up on the 12,634 in 2020 – but 18% below the 17,166 in 2019.
When will insolvencies hit?
The warning is that: There’s always a lead in time to insolvencies. It was expected that they would go up in the last quarter of 2021 and is now expected to start going up in Quarter 2 /Quarter 3 of 2022.
Firms that might have collapsed in the past two years have survived because of emergency rules preventing creditors from issuing winding-up petitions against struggling firms during the pandemic. During the pandemic, HMRC has been told not to issue proceedings against firms they normally would have.
How will HMRC respond?
It is thought that HMRC will be very conscious of supporting UK plc and they’re also fighting other battles such as dealing with financial fraud [associated with the package of covid measures].
Government support has undoubtedly stopped a number of firms failing that ordinarily would have failed. The support was very timely and absolutely necessary. It saved an awful lot of businesses and jobs. Furlough was a masterstroke.
It is expected a return this year to the pre-pandemic number of insolvencies, there is going to be a spike but where does the spike stop? Will the number go past normal levels?
Industry inside information which is based on administration data filed at the London, Edinburgh and Belfast Gazettes as well as filings made at Companies House, show the number of liquidations began to go up last year after falling in 2020. But the number of administrations and Company Voluntary Arrangements, which allow firms to pay creditors over a fixed period and avoid going into administration, were still below pre-pandemic levels.
Struggling firms needed to prepare cashflow forecast plans and “demonstrate [to lenders] they’re well informed about the company’s financial position and they’ve spotted a problem”.
About the author
Iain heads Beeston Shenton’s commercial litigation department.
Iain has 30 years of experience in Commercial Debt Recovery and Insolvency fields having worked in both Private Practice and Industry and has extensive experience working across all industry sectors and has particular expertise in working with Insolvency Practitioners in advising and recovering outstanding insolvent company ledgers.
Iain brings a pragmatic and commercial approach.
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