Recent data reveals a concerning trend for the business landscape in England and Wales, as the number of company insolvencies reached the highest level since Q2 2009. According to official figures released for Q2 2023, by the Insolvency Service and Companies House, there were a staggering 6,342 registered company insolvencies during this period.
The figures indicate that this surge in insolvencies is primarily driven by creditors’ voluntary liquidations (CVLs), which accounted for 5,240 cases. Additionally, there were 637 compulsory liquidations, 409 administrations, and 56 company voluntary arrangements (CVAs) during the same quarter.
After seasonal adjustment, the number of insolvencies in Q2 2023 marked the highest level since Q2 2009, reflecting a significant 9% increase from Q1 2023 and a notable 13% increase from Q2 2022. Particularly alarming is the fact that the number of CVLs reached its highest quarterly level since 1960. While compulsory liquidations also rose, they remained slightly below the levels seen before the onset of the COVID-19 pandemic.
The data further reveals that approximately 1 in 192 active companies, equivalent to a rate of 52.0 per 10,000 active companies, entered insolvent liquidation between April 2022 and June 2023. This represents an increase from the previous year, during which 43.9 per 10,000 active companies faced liquidation.
Comparing the figures to pre-pandemic levels, it becomes evident that the pandemic had a substantial impact on insolvency rates. From the beginning of the COVID-19 pandemic until mid-2021, the number of company insolvencies remained notably low, mainly due to various fiscal and support measures implemented by the government to aid businesses and individuals during the challenging period. However, the trend took a significant turn in the past year (Q3 2022 to Q2 2023), witnessing a remarkable increase in CVLs, compulsory liquidations, and administrations, all approaching levels close to what was seen before the pandemic hit.
Economists and analysts are closely monitoring the situation, trying to understand the factors contributing to this surge in insolvencies. It is vital to determine whether this is merely a delayed impact of the pandemic or if there are underlying economic challenges that businesses are now facing. The alarming surge in insolvencies raises concerns for the overall health of the business sector. Policymakers and business leaders may need to consider targeted interventions to support struggling companies and protect the wider economy from potential repercussions. As the situation unfolds, it is crucial to closely monitor insolvency rates and take necessary actions to promote business resilience and economic stability.
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