A record number of English and Welsh companies entered insolvency in the final quarter of 2021 as key coronavirus support measures were lifted.
With 4,627 companies entering insolvency in the final three months of the year, insolvencies were at their highest point since the third quarter of 2012.
Earlier in the pandemic, government support schemes helped push quarterly insolvencies to a low of 2,400 – the lowest figure since 1989.
Creditor’s voluntary liquidations (CVLs) accounted for the vast majority of insolvencies in October, November and December, increasing to 4,175 in the fourth quarter of 2021.
A CVL is where the directors of an insolvent company decide, with the agreement of shareholders, to put a business into liquidation to pay outstanding debts. This differs from a compulsory liquidation, which would see a company’s creditors petition a court to liquidate the company.
Colin Haig, president of insolvency and restructuring trade body R3 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.”
The government’s furlough scheme, which helped pay the wages of 11.6 million workers throughout the pandemic, ended in September 2021. Temporary legislation that blocked creditors from taking legal action against struggling businesses began to be phased out in October 2021.
Tom Fox, Licensed Insolvency Practitioner at Umbrella.UK Insolvency, said: “Financial support and legal protection helped keep many businesses going through the pandemic. Some of the companies that entered insolvency late last year will have been ‘zombie companies’ that would have folded earlier without government support, but many will undoubtedly have been victims of Covid-19.
“As prices rise and coronavirus loan repayments start to bite, we expect to see more firms getting pushed towards insolvency in 2022. And we’re on hand to help in any way we can.”
For more information about company insolvency solutions, speak to a member of the team today. Call: 0800 611 8888.