Wed, 03 Aug 2022 | BUSINESS NEWS
Company insolvencies soared in the second quarter of the year as UK businesses were hit by high costs, supply chain and staff issues and the end of government COVID-19 support packages. In new figures from the UK’s Insolvency Service, company insolvencies were up 81 per cent from Q2 2021 to 5,629, the highest figure for close to 13 years.
This huge rise was driven by a massive increase in creditors’ voluntary liquidations (CVLs). There were 4,908 CVLs during the quarter, the highest quarterly figure since records began in 1960, accounting for around 87 per cent of all insolvencies.
Compulsory liquidations increased to 368 (although this remained below pre-pandemic levels), 320 firms entered administration, 32 entered company voluntary arrangements (CVAs) and there was one receivership appointment.
John Cullen, Business Recovery Partner at Menzies, commented: “This is indication of the severe cashflow pressures that many businesses are facing, which are exacerbated by soaring energy and fuel costs. Inflation is testing the viability of businesses across industry sectors and with interest rates expected to rise again this week, the cost of borrowing is also set to rise.”
“At the same time as facing significant cost increases, many businesses are being hampered by supply and staff shortages, which are limiting revenues at a critical time, just as demand levels are recovering or back to pre-pandemic levels.”
The dramatic rise of CVLs has been described by Samantha Keen of EY-Parthenon as the “first tranche” in a long-expected wave of insolvencies. A surge in company collapses had been widely forecast to occur following the withdrawal of government COVID-19 support schemes, but the issue has now been further escalated by supply chain issues and soaring inflation.
R3 President Christina Fitzgerald said: “The increase this year – and the surge in CVLs in the final quarter of 2021 – suggests that many directors are opting to close their businesses as they lack confidence in their trading prospects in the current climate. And while insolvencies still haven’t reached pre-pandemic levels, this is unlikely to remain the case for long.”
Given the worsening situation many businesses find themselves in, many are forecasting that the recent surge in insolvencies is set to continue and, most likely, intensify over the coming months as costs rise, markets adjust to ongoing volatility and consumer confidence deteriorates amid the cost-of-living crisis.
EY-Parthenon's Samantha Keen said: “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."
“The impact from the slowdown in consumer spending is likely to be felt in the autumn, just as many retail and hospitality businesses gear up for the all-important ‘golden quarter’. These businesses, which are highly sensitive to fluctuations in consumer demand, will be most vulnerable.”
The rapid increase in insolvencies will inevitably create a raft of opportunities for buyers to acquire businesses that have fallen into financial distress amid exceptionally challenging market conditions, but are otherwise viable. Find out more about using distressed acquisitions to grow your business.
Click here to view the UK's latest distressed businesses.
View recent UK administrations.
The extensive service offering includes painting and decorating, spraying, electrical, building works, mastic and sparkle cleaning. Strong pipeline in place for the coming year, valued at approximately £2.5m.
LEASEHOLD
The first shop was opened in 2016 by the original founder, using fresh toppings, handmade dough and a 400-degree fire oven. The franchise has gone from 1 London shop to over 120 branches across the country including Scotland & Wales.
LEASEHOLD
This is a fantastic opportunity to acquire a South East England based lithob& digital print business with excellent transport links/access to London and the M4 corridor.
LEASEHOLD
23
|
Mar
|
Acquisitions put property service firm on course to quadruple turnover | BUSINESS NEWS
Property service firm The SDDE Smith Group is on course to q...
23
|
Mar
|
PE backing drives major M&A deal in UK catering equipment sector | BUSINESS SALE
The Airedale Group, a private equity-backed catering equipme...
22
|
Mar
|
Cumbernauld shopping centre to go up for sale after entering administration | COMMERCIAL PROPERTY
The owner of Cumbernauld's Antonine Shopping Centre, Br...
Sign up to receive our acquisition alert emails to get your FREE guide
23
|
Mar
|
PE backing drives major M&A deal in UK catering equipment sector | BUSINESS SALE
The Airedale Group, a private equity-backed catering equipme...
23
|
Mar
|
Acquisitions put property service firm on course to quadruple turnover | BUSINESS NEWS
Property service firm The SDDE Smith Group is on course to q...
22
|
Mar
|
Manufacturing M&A hits highest level since 2016 | BUSINESS NEWS
M&A activity involving UK manufacturing businesses reached i...
Business Sale Report is your complete solution to finding great acquisition opportunities.
Join today to receive:
All this and much more, including the latest M&A news and exclusive resources
Please choose your settings for this site below. For more information please read our Cookie Policy
These cookies are necessary for our website to function properly and provide you with access to all features.
These are analytics cookies that help us to improve the way our website works.
These are used to improve the functional performance of the website and make it easier for you to use.