Business insolvencies at highest level since 1960

The last few years of insolvency statistics were artificially depressed due to the impact of Government held schemes. Now this has greatly reversed with this highest level of insolvencies reported in 60 years

According to data published by the Insolvency Service, the number of company insolvencies in Q1 2022 (2,114) was more than double that seen in Q1 2021 (999).

From March 2021, there has been a steady rise; however, the monthly increase from February 2022 to March 2022 has shown a 41% increase.

Whilst compulsory and other insolvencies remain at historically low levels, the growth has been driven by a significant increase in the number of voluntary liquidations. 

Interestingly this increase is limited to corporate insolvencies. Personal insolvencies have remained relatively stagnate at pre-pandemic levels.

The Government finally lifted the final temporary COVID related insolvency measures in March 2022, which has likely been related to some increase.

Furthermore, inflation increased to 6.2% in March 2022 – a peak since Q1 1992. The rise in inflation undoubtedly has and will continue to see a reduction in discretionary spending by consumers who will begin to prioritise their spending for essentials and reduce or even stop their luxury spending.

The impact of the increased insolvencies and inflation is that no link in the supply chain is protected. B2C businesses will find that their customers will be sensitive to the effects of prices.

Whereas B2B businesses will find the consumer sensitivity feeds up the supply chain and potentially find their customers or suppliers have entered into an insolvency process, leaving them out of pocket.

Businesses should ensure they continue to monitor the creditworthiness of their customers and make adjustments where necessary to ensure there are no nasty surprises along the way.

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