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Corporate Insolvencies Continue To Rise

Corporate Insolvencies Continue To Rise

There is a dark cloud above us as the number of corporate insolvencies continue to rise in Scotland, England and Wales.

With corporate insolvencies expected to increase by 33% this year, UK insolvency figures from Q4 2021  are showing that the needle is indeed moving.

Corporate insolvencies in Scotland

The number of Scottish corporate insolvencies in Q4 2021 increased by 77% compared to the same quarter in 2020.

The official figures reveal there were 239 corporate insolvencies during the final quarter of 2021, compared to 135 in the same quarter 2020.

What has caused insolvencies to increase in Scotland

Creditors’ Voluntary Liquidations increased by 115% year on year, going from 88 in Q4 2020 to 189 Q4 2021. A Creditors’ Voluntary Liquidation is where directors of a company voluntarily choose to place a business into liquidation to pay its debts.

This is alarming because it indicates that there is a strain on the credit cycle, the businesses who are waiting to be paid by the now liquidated company are at serious risk of not ever receiving the amounts owed.

This is why it is so important to act quickly to recover any outstanding balances owed to your business as failure to do so can mean that you miss out on the cash you are owed. The fact that these types of liquidations have increased by more than 100% should be sounding alarm bells to businesses who are owed for overdue invoices.  

Corporate insolvencies in England & Wales

Corporate insolvencies are also increasing dramatically in England and Wales, increasing by 56% during the final three months of 2021.

The number of company insolvencies in Q4 2021 was 4,565, and this is 11% higher than the number registered in 2019, meaning company insolvencies in England and Wales are higher than pre-pandemic levels.

What has caused insolvencies to increase in England and Wales

We’ve previously discussed reasons why corporate insolvencies are continuing to rise, such as the lifting of the temporary ban on winding up petitions, the removal of fiscal support from the Government such as furlough, rates relief and CBILs/CLBILs/Bounce Back Loans. The companies under financial stress will be under increased pressure as the number of late payments continue to increase.

November 2021 seen corporate insolvencies in England and Wales rise above pre-pandemic levels for the first time, indicating that the “insolvency Armageddon” could be upon us.

Insolvency Practitioner Begbies Traynor Group recently reported that there has been a rise in County Court Judgements (CCJs) of 106%. This means that more companies are using the courts to recover unpaid debts which indicates future insolvencies are coming.

Data from Q4 2021 shows the number of businesses in ‘critical financial distress’ is up 7% year on year meaning that businesses on the verge of failure could find themselves in an even more perilous position, leading to more corporate insolvencies.

There are particular industries that are faring worse too with support services and construction being the most affected industries when it comes to critical financial stress, both industries heavily reliant on commercial deals in their supply chains. The construction industry is the third largest industry in the UK but has been heavily impacted by supply chain issues, inflation and late payments. This is all putting tremendous strain on the credit cycle and has a knock-on effect on other industries tied to construction, which will lead to businesses failing as they are left waiting for invoices to be paid.

How Darcey Quigley & Co can help

Over the past six months we have seen first-hand the impact these rises in insolvencies are having. Whilst it means we are hard at work recovering more debts for our clients, it gives us insight to the monumental problem late payments are having on businesses in the UK.

Our advice if you are waiting on outstanding invoices to be paid is to act quickly. There are two reasons why:

  1. The longer you leave a debt outstanding the more difficult it will be to successfully recover the full amount.
  2. As we have seen, insolvencies are inevitable and could come at any moment. All it takes is one company to miss a scheduled payment for another company to fail. If a company that owes you money goes insolvent you are at huge risk on being unable to recover what you are owed, meaning you would have to write the debt off.

Neither of these scenarios are good for your cashflow and therefore the survival of your business. Our team of dedicated credit management consultants are on hand to make sure you avoid these situations. Schedule a call with our team at the time that suits you or call us on 01698 821 468.

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