Q3 sees 40% year-on-year increase in company insolvencies

These comprised of 4,800 creditors’ voluntary liquidations (CVLs), 492 compulsory liquidations, 274 administrations and 29 company voluntary arrangements (CVAs).  

After seasonal adjustments, the total number of company insolvencies that took place in the quarter was 40% higher than during the same period – July to September – in 2021, but one percent lower than the second quarter of 2022.  

The number of CVLs, meanwhile, remained close to the highest quarterly level since the start of the series back in 1960. Responding to this, R3 president Christina Fitzgerald said: “The cause of the increases in figures for these processes is a perfect storm of directors running out of road and creditors being able to pursue unpaid debts after the temporary legislation designed to deter this ended in the summer.  

“It seems inevitable that numbers will increase in the coming months as the state of the economy, increased costs, and people’s reluctance to spend money because of the cost of living deals a further blow to those businesses that have struggled since the beginning of the pandemic.”  

Looking at the figures in Scotland, historically insolvencies have been driven by compulsory liquidations. However, since the beginning of the pandemic, there have been more than three times as many CVLs as compulsory liquidations.  

Looking at this more closely, between 26 June 2020 and 30 September 2022, no moratoriums were obtained in the country and two companies had a restructuring plan at Companies House.  

As for its total liquidations rate, in the 12 months ending in the third quarter of 2022, this hit 44.1 per 10,000. This was up by 17.1 from a rate of 27 per 10,000 from the 12 months ending in the third quarter of 2021.  

In Northern Ireland, 50 company insolvencies took place in the third quarter of 2022 – an increase of 47% from the same quarter in 2021. This comprised of 38 CVLs, five compulsory liquidations, four administrations and three CVAs.   

The total liquidation rate, meanwhile, for the 12 months ending in the third quarter of 2022 was 25 per 10,000 active companies. This is an increase of 11.5 from the rate of 13.5 per 10,000 active companies in the 12 months in the third quarter of 2021.  

Individual insolvency rates

In England and Wales, the number of individual insolvencies that took place in the third quarter of 2022 was five percent lower than in the second quarter of 2022 at 27,927.  

Broken down, the number of individual voluntary arrangements (IVAs) and debt relief orders (DROs) was lower, but bankruptcies were slightly higher – however total individual insolvencies were two percent higher than in the third quarter of 2021.  

There were also 18,347 Breathing Space registrations that had taken during this time – 18% higher than in the third quarter of 2021. Of these, 18,050 were standard breathing space registrations and 297 mental health breathing space registrations.  

Additionally, one in 405 adults – at a rate of 24.7 per 10,000 adults - entered insolvency between 1 October 2021 and 30 September 2022. This is an increase from the 24 per 10,000 seen during the 12 months ending 30 September 2021.  

Responding to these figures, Fitzgerald said: “Although personal insolvency numbers have fallen compared to the last quarter due to a decline in IVA and DRO numbers, the figures are still higher than they were this time last year because of an increase in the number of people entering an IVA. 

“This, coupled with the increase in bankruptcies between this and the last quarter, suggests that the cost-of-living crisis is starting to be reflected in personal insolvency numbers, as people turn to personal insolvency processes to help resolve their financial issues. 

“People are very worried about money right now. Prices are rising at the fastest rate of 40 years and increased costs of heating, eating, and fuelling vehicles are a serious and ongoing concern for many. While unemployment is down, wages haven’t kept pace with inflation and more people are borrowing money as the pounds in their pockets don’t go as far as they did 12 months ago.  

“Increased borrowing can put people at risk of insolvency as it only takes a missed payment, a cut in hours at work or an unexpected bill to turn a challenge into a problem and move someone from being on a financial knife edge to being unable to pay their debts.”  

Scotland saw 2,069 individual insolvencies take place in the third quarter of 2022 – eight percent higher than during the same quarter in 2021. This was comprised of 1,480 protected trust deeds and 589 bankruptcies – of which 378 went into bankruptcy via the minimal asset process route.

 
In Northern Ireland, 437 took place during this time – up six percent when compared to the third quarter in 2021. This was comprised of 373 IVAs, 46 DROs and 18 bankruptcies.

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