Company insolvencies at its highest since 2009

In addition to this, the number of creditors’ voluntary liquidations (CVLs) that took place in the year was the highest annual number since records began, with this being the most common company insolvency procedure – taking place in 85% of cases. Additionally, when compared to 2021, CVLs increased by 49%. 

The next most common form of insolvency in the year was compulsory liquidations, with this happening nine percent of the time. The number that took place was also 296% higher than the record low seen in 2021, but 34% lower than 2019.  

Meanwhile, one in 202 companies in England and Wales entered liquidation in 2022 – with this being the at its highest since 2015. 

As for administrations, these accounted for nine percent of all the cases – with the number taking place being 55% higher in 2022 than in 2021, but 32% lower than in 2019. The final one percent of cases were made up of creditors’ voluntary arrangements, with this being both lower than 2021 and 2019 – three percent and 68% respectively – and is the lowest annual number since 1993. 

Responding to these figures, R3 president Christina Fitzgerald said: “2022 was the year the insolvency dam burst. After two years of being suppressed by government support programmes, corporate insolvency numbers hit a 13-year high last year.  

“This was mainly due to CVLs reaching their highest level in 62 years as more and more directors turned to this process to close down their businesses.  

“After nearly three years of trading through a pandemic, and in the face of the end of Government support, rising costs and a cost-of-living crisis, many directors simply ran out of road this year and chose to close their businesses before the choice was taken away from them. 

“Alongside this, the end of the government’s temporary legislation on winding-up orders has left creditors free to pursue unpaid debts, which is why Compulsory Liquidation numbers are at their highest in three years. 

“With the entire supply chain under pressure from increased costs, the flexibility we saw from creditors during and in the aftermath of the pandemic to those who owed them money has disappeared, and many are now taking action to recover the debts they are owed in an attempt to balance their own books. 

“Inflation is still high, supply chains are still squeezed, and people are still worried about the cost of living, so it’s likely we’ll see insolvencies continue to rise this year unless the trading climate takes a drastic turn for the better.

Insolvencies by industry

By industry, construction saw the most insolvencies in England and Wales in 2022 – making up 19% of the cases with 4,143 in the year. This was followed by wholesale and retail trade, and accommodation and food service activities – making up 15% and 12% of insolvencies respectively. 

Insolvencies in the administrative and support services sector, meanwhile, made up 10% of cases with 2,212 taking place during the year while those involved professional, scientific and technical activities made up eight percent of all the cases seen.  

Overall, all industries saw an increase in insolvency numbers between 2021 and 2022. For the larger sectors, these increases ranged from 31% in the professional, scientific and technical activities space to 89% in wholesale and retail.  

Individual insolvencies

From an individual perspective, one in 399 adults – at rate of 25 per 10,000 adults – entered insolvency in England and Wales in 20222 – higher than the 23.3 per 10,000 adults seen in 2021, although this is a decrease on the 26.1 per 10,000 adults from 2019. In total, 118,850 were registered in 2022.  

2022 did, however, see the lowest annual number of bankruptcies since 1982 while debt relief orders were slightly higher than in 2021 but remained below pre-pandemic levels. Additionally, the annual number of individual voluntary arrangements increased from its previous record high in 2021.  

Commenting on this, Fitzgerald said: “Personal insolvencies reached their highest numbers for three years in 2022 as a result of more people turning to individual voluntary arrangements and debt relief orders to resolve their financial issues as the cost-of-living crisis and falling wages took its toll on their finances. 

“However, it’s worth noting that bankruptcy numbers are at a 10-year low, which suggests that more people are seeking and agreeing arrangements with their creditors earlier. 

“The last 12 months have been tough for UK households. Money worries have been front of mind for many as the increased costs of heating, eating and fuel has meant budgets are stretched. 

“People are anxious about the economy, their personal finances and rising prices, and are reluctant to make major purchases as the money they do have available goes to pay for necessities. Further news today that grocery price inflation remains worryingly high will only add to the pinch being felt by many households across the UK. 

“More and more are turning to borrowing to cover their costs, which can make them more vulnerable to the kind of shocks that lead them to become insolvent. While we understand why people would take this step, it’s not an advisable one.”