Andreas Arakapiotis, London and South East Chair of insolvency and restructuring trade body R3, responds to the publication of the January 2023 corporate and individual insolvency statistics for England and Wales:
“Despite the monthly fall in corporate insolvencies, numbers are still higher than they were in January 2020, 2021 and 2022 – and not far below what they were in January 2019. Proportionally, Creditors’ Voluntary Liquidations account for 83% of the total corporate insolvencies which is lower than January 2022 of 87% but higher than January 2021 of 81%, January 2020 of 67% and January 2019 of 68%.
Directors are still turning to this process to close down their businesses as trading conditions and creditor pressures remain tough – and many are taking this step before the choice is taken away from them.
There are clear signs of creditor pressure increasing with Compulsory Liquidations increasing by 52% compared to January 2021 although total numbers remain low compared to January 2020 and January 2019 levels.
“It’s been an unhappy New Year for businesses in England and Wales. The cost-of-living crisis and ongoing economic issues have meant the traditional new year spike in sales hasn’t happened, and we’ve seen a number of household names enter an insolvency process over the last month in an attempt to resolve their financial issues.
“As household disposable income contracts and pay lags behind inflation, many people are cautious about how and where they spend their money and are looking to make cuts in essential and non-essential spending.
“This is a further blow for businesses who are looking to get back on their feet after a torrid three years and are now caught in a pincer movement of rising costs and falling income.
Business rescues by means of Administration and Company Voluntary Arrangements have increased by 19% compared to January 2022 although total numbers remain well below January 2020 and January 2019 levels.
“Our advice to directors, managers and owners in London is to be alert to the symptoms of business distress and to seek advice from a qualified source if they spot signs their firm is struggling.
“If they can see stock levels increasing, cashflow becoming a problem, or are struggling to pay rent, bills, taxes or staff, that’s the time to seek advice – and doing so as early as possible will give them more potential solutions and potentially a better outcome than if they’d waited until the problem became more severe.”
Andreas, who is Partner at Kallis Insolvency Practitioners, continues: “The fall in personal insolvencies is a result of a drop in the number of people entering a Debt Relief Order and an Individual Voluntary Arrangement (IVA). It’s important to note that some IVA numbers for the last two days of January haven’t been included in this month’s figures, so the true picture of personal insolvencies in England and Wales for January isn’t yet available.
“However, it’s worth noting that while bankruptcy numbers have increased monthly and yearly, they are still well below 2020 and 2019 levels. This suggests that while more people have entered a bankruptcy than last month, the cost-of-living crisis isn’t translating into an increase in the number of people needing this process to resolve their financial distress.
“Despite this, money worries are still front of mind for many people, and as costs rise and wages continue to lag behind inflation, people are watching their outgoings like hawks.
“Heating, eating and travelling are continuing to become more expensive, and there are a lot of people who are worried about their bills, their financial futures, and the economy and are cutting their costs wherever they can as a result.
We urge anyone in London who is worried about money – whether that’s you or your business – to seek advice as soon as possible. We know how hard it is to admit you’re struggling financially, but having that conversation at an early stage gives you more options and more time to consider your next move than if you’d waited until the situation worsened.
“Most London R3 members will give a free consultation to potential clients so they can understand more about their position and outline the potential options for improving it.”