A dramatic year-on-year increase in corporate insolvencies to their highest point in a decade suggests that many East Midlands directors are opting to close their businesses, with failing confidence in their ability to trade in the current economic climate.
This is according to the Midlands branch of insolvency and restructuring body R3 and follows latest government statistics for England and Wales which highlight an 81.3% year-on-year increase in corporate insolvencies in the second quarter of 2022, rising from 3,105 in the same period in 2021 to the current total of 5,629.
R3 Midlands chair Eddie Williams, a partner at PwC in the region, said: “These figures show the highest levels of corporate insolvency since 2012, driven by an increase in all forms of insolvency process. Creditors’ Voluntary Liquidations have reached their highest recorded figure of 4,908, indicating that many directors are opting to close their businesses due to increasing economic pressures.
“The steady rise in Compulsory Liquidations since the start of the year also suggests that creditors are now making use of their power to issue winding-up petitions to try and claw back monies they are owed.
“Despite May’s unexpectedly positive GDP figures, these government statistics show that now is not the time for complacency. The current economic headwinds are only likely to worsen before they improve, and this will lead to local companies having to overcome a tough second half of this year.
“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. This, coupled with soaring utility costs, supply chain issues, rising interest rates and a tight labour market, will mean an uphill battle for many businesses.
“The insolvency statistics should be a timely prompt for any company director struggling with cashflow. Objective advice should be sought from a qualified, professional source to decide the best path forward – and the earlier this is done, the better.
“Most R3 members will give an hour’s free consultation to potential clients to enable them to understand more about the circumstances of the business, and to outline the options available to help them improve their situation.”
