Corporate insolvencies rose 5.5% in August amid cost-of-living crisis

Corporate insolvencies rose 5.5% in August on the previous month’s figures, according to the government’s latest statistics published on 16th September.

1,933 registered company insolvencies were recorded last month by the Insolvency Service, a rise of over 40% on both last August’s figures, and the pre-pandemic figures of August 2019. The increase in the number of businesses closing their doors was largely due to Creditors’ Voluntary Liquidations (CVLs), with other types of insolvencies remaining lower than pre-pandemic figures.

The figures highlight the increasing strain on the economy as businesses manage the dual impact of the cost-of-living crisis and inflation. The Bank of England is also expected to raise interest rates further this week to curb inflation, adding further stress on businesses that have accrued debts over the pandemic.

Christina Fitzgerald, President of the insolvency and restructuring trade body R3, commented:

“The monthly increase in corporate insolvencies – to the third highest set of monthly statistics since January 2019 – has mainly been caused by an increase in the number of Creditors’ Voluntary Liquidations.

“This suggests that directors remain concerned about their ability to continue to trade in the current climate, and are choosing to close their businesses before that choice is taken away from them.

“These figures will be a sobering reminder to government of the scale of the challenge facing the UK economy as we head into the winter months, and reflect the continued toll the sustained economic turbulence is taking on businesses in England and Wales.

“Companies are facing enormous running cost hikes just as household spending is facing its biggest squeeze in several decades which delivers yet another blow to business owners who were hoping to bounce back to normal trading levels post-pandemic.

“Many directors and managers are worried about the rise in prices and energy costs and the effect these will have on their margins and profits, and this is set to continue to be a concern.”

Personal insolvencies also rose in August, with 565 bankruptcies registered, up 10% on the previous year, but still below pre-pandemic levels. 7,340 IVAs were registered per month in the three-month period ending August 2022, along with 1,932 Debt Relief Orders, and 6,058 registrations to the government’s Breathing Space scheme to protect individuals from creditor action, highlighting the effect of the cost-of-living crisis on personal finances. Christina Fitzgerald added:

“We urge anyone who is worried about their business or personal finances to seek advice as soon as possible. Talking about your concerns about money is difficult, but the sooner you seek advice, the more potential options you have open to you, and the more time you have to take a considered decision about your next step.”