81% year-on-year increase in company insolvencies

After seasonal adjustments, this number was 13% higher than in the first quarter of 2022 and 81% higher than in the second quarter of 2021. This 5,629 figure comprised of 4,908 creditors’ voluntary liquidations (CVLs), 368 compulsory liquidations, 320 administrations, 32 company voluntary arrangements (CVAs) and one receivership. 

CVLs
CVLs accounted for 87% of all company insolvencies that took place in the second quarter of 2022. The 4,908 figure was a 13% increase from the number recorded in the first quarter of 2022, and 74% higher than during the same quarter last year.

The number of CVLs was also the highest recorded since the series started in 1960. In addition to this, the year-on-year increase in CVLs coincided with the phasing out of measures put in place to support businesses during the Covid pandemic. 

Reflecting on this, EY-Parthenon UK turnaround and restructuring partner and president of the Insolvency Practitioners Association Samantha Keen said: “The record levels of CVLs are the first tranche of insolvencies we expected to see involving companies that have struggled to stay viable without the lifeline of government support provided over the pandemic.

“We expect further insolvencies in the year ahead among larger businesses who are struggling to adapt to challenging trading conditions, tighter capital, and increased market volatility.” 

Compulsory liquidations
Compulsory liquidations were the second-most prevalent type of company insolvency in the second quarter of 2022, with the 368 figure also being nine percent higher than in the previous quarter and 261% higher than the second quarter of 2021. However, these numbers remained lower than pre-pandemic levels. 

These low numbers since the start of the pandemic are likely to have been driven in part by the fiscal support put in place by the government, as well as other measures such as the temporary restrictions on the use of statutory demands and certain winding-up petitions. 

By the end of September last year, some of these temporary government supports either ended or were replaced by new tapering measures. In addition to this, until 31 March 2022, the debt threshold for a winding-up petition was £10,000 instead of £750, with creditors also required to provide debtor firms 21 days to provide proposals for payment before they proceed with winding-up action.  

Administrations and CVAs
Administrations made up six percent of cases in the second quarter of 2022, with the 320 figures being 18% higher than in the first quarter of 2022 and 95% higher than the number in the second quarter of 2021. 

CVAs, meanwhile, made up one percent of the total insolvencies in the second quarter of 2022. This was 28% higher than both the first quarter of 2022 and the second quarter of 2021. 

Liquidations
Looking at the liquidation rates in the year up to the second quarter of 2022, the company liquidation rate was 43.9 per 10,000 companies. This corresponds to one in 228 companies entering liquidation. 

During this period, the rate increased by 0.6 per 10,000 active companies from the first quarter of 2022 - and was 0.7 higher than during the same period ending in the second quarter of 2021. In addition to this, the rate of CVLs rose by 4.5 from the first quarter of 2022 and by 17.8 from the second quarter of 2021. 

The rate of CVLs after administration was, however, 0.1 lower than the first quarter of 2022 and 0.7 lower than the same period up to the second quarter of 2021. 

Insolvencies by sector
In the 12 months ending in the second quarter of 2022, the three industries that experienced the highest number of insolvencies were construction, wholesale retail trade, and accommodation and food service activities with 3,665, 2,544 and 2,206 insolvencies respectively. 

These were also the three sectors with the most insolvencies during the same period up to the second quarter of 2021, with the construction industry usually having the highest quarterly number of insolvencies of any industrial grouping. 

Alongside this, all industries saw increased insolvency numbers in the 12 months ending in the second quarter of 2022 when compared to the same period ending in the second quarter of 2021. For the large sectors, increases ranged from 49% in accommodation and food services to 101% in construction. 

Responding to the figures, R3’s vice president Nicky Fisher said the current economic headwinds are “only likely to get worse before they get better”, and this will mean businesses in England and Wales will have a tough second half of the year. 

She added: “With household disposable income dropping for the eighth consecutive month in June, consumers are having to prioritise household bills before they can think about spending their money elsewhere - and this will have a knock-on effect to businesses that simply won’t see the footfall they are used to.

“This, coupled with a combination of soaring costs across the board, supply chain issues, and a tight labour market, has meant an uphill battle for many businesses, especially for those still reeling from the pandemic.” 

Scotland and Northern Ireland

As for the numbers in Scotland, a total of 261 company insolvencies took place in the second quarter of 2022 - which was 58% higher than in the same quarter in 2021. These comprised of 208 CVLs, 44 compulsory liquidations, eight administrations and one CVA.

The total liquidation rate for the country for the 12 months ending in the second quarter of 2022 was 41.9 per 10,000 active companies. This was up by 19% on the rate of 22.9 per 10,000 active companies from the 12 months ending in the second quarter of 2021. 

As for Northern Ireland, 58 company insolvencies took place in the second quarter of 2022 - an increase of 152% when compared to the same quarter in 2021. This 58 comprised of 33 CVLs, 20 compulsory liquidations, two administrations and three CVAs. 

The total liquidation rate in the 12 months ending in the second quarter of 2022 in the country was 23.6 per 10,000 active companies. This is an increase of 11.7 from the rate of 11.9 per 10,000 from the 12 months ending in the second quarter of 2021.