UK Insolvencies Expected to Rise During 2022
9 May 2022
With the announcement on 6 May that convenience chain McColl’s has collapsed into administration, putting 16,000 jobs at risk, it is evident that the High Street will continue to suffer as interest rates are on the increase and another recession looms.
More locally, the company behind Rushmere Shopping Centre, namely Central Craigavon Limited, also entered into administration in April. It is widely anticipated that there will be a continuing rise in insolvencies in 2022 and 2023. This can be largely attributed to bankruptcies of businesses that were saved by the Government during the pandemic. The protections and restrictions, which by and large limited winding up petitions being presented against Companies, have been either removed or relaxed.
The cessation of fiscal support initiatives including the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) has exacerbated the problem and as the schemes were gradually phased out, we saw the highest levels of Insolvency in November 2021 since the beginning of the pandemic. This was largely driven by a rise in the number of Creditor Voluntary Liquidations (CVLs).
In 2022, after seasonal adjustments, there were a total of 4,896 company insolvencies in Q1 2022, the majority comprising 4274 CVLs. This highlights that UK businesses are facing unprecedented challenges and company directors are choosing to close their businesses. In Northern Ireland in Q1 2022, there were 56 company insolvencies, nearly three times higher (an increase of 273 percent) than in the same quarter of 2021.
Added to this are the continuing supply chain issues, labour shortages and the financial and other economic effects of the war in Ukraine. Worried about the effect of inflation and rising costs, The Bank of England, as the nation went to the polls, raised interest rates from 0.75% to 1.00% and it is widely expected that rates will continue to rise. As this puts the squeeze on consumer spending and on businesses it seems that the escalation of insolvencies seems inescapable.
As such Insolvency Practitioners and Solicitors who deal with Insolvency issues are gearing up for a rise in the number of distressed businesses in 2022. The general advice is that if directors are concerned about their business, its debts, or future prospects, then they should seek expert support in dealing with those issues sooner rather than later.
If you need assistance on any of the above, please do not hesitate to contact our Insolvency & Debt team to discuss your specific needs.