A month-on-month fall in the number of corporate insolvencies in England and Wales is unlikely to be a true reflection of the financial health of local businesses, warns the Midlands branch of insolvency and restructuring trade body R3.
National figures published by the government’s Insolvency Service show that the number of companies entering insolvency fell to 1,679 in September 2022, a 13.5% decrease compared to the previous month’s total.
According to R3 Midlands, when a longer-term view of the national data is taken it demonstrates more accurately what may be happening with businesses in the region. In comparison to September 2021’s figure of 1,453, corporate insolvencies have increased by 15.6%, and this month’s total is also 11.3% higher than September 2019’s figure of 1,508.
R3 Midlands chair Eddie Williams, who is also a partner at PwC in the East Midlands, said: “September’s decrease in corporate insolvencies is due to a drop in Creditors’ Voluntary Liquidations, while the year-on-year increase has been caused mainly by a rise in Compulsory Liquidations, which is probably due to the end of legislation around winding-up petitions.
“The increase in corporate insolvencies between September 2019 and September 2022, on the other hand, can be attributed to a significant increase in the number of Creditors’ Voluntary Liquidations.
“The triple whammy of the withdrawal of Covid support, the current economic turbulence and the challenging business climate are key factors in directors feeling that they are unable to continue trading and opting to close their business voluntarily.
“Currently, local companies are operating against a backdrop of mounting uncertainty, which is impacting heavily on their financial health. A volatile pound, a decline in consumer confidence and lower household spending have all contributed to weaker economic growth.
“With conditions likely to worsen before they improve, business owners need to remain alert and seek advice at the first sign of financial distress.
“Most insolvency practitioners in the Midlands region will offer a free hour’s consultation to a potential client so that they can understand more about their business, its circumstances and outline what options might be available.”
