The press release issued by PWC on 31 January 2023.
According to the Insolvency Service’s latest quarterly data, in Q4 2022 there were 5,995 registered company failures driven by 4,891 creditors’ voluntary liquidations (CVLs), 720 compulsory liquidations, 359 administrations and 25 company voluntary arrangements (CVAs).
22,109 companies failed in 2022, according to the Insolvency Service, the highest number since 2009 and 57% higher than 2021. Year-on-year CVLs increased by 49% to 18,821 ( 12,656 in 2021 to the highest annual number since 1960. These accounted for 85% of all company insolvencies.
Catherine Atkinson, director in PwC’s Restructuring & Forensics practice, said:
“The Insolvency Service’s report that 2022 saw the highest number of company failures since 2009 is a stark reflection of the challenges businesses have been and will continue to face in the first quarter of 2023. Financial headwinds caused by trading costs, rent, interest rates and utility bills alongside other operational pressures are causing increasing amounts of drag on companies weathering working capital pressures as they wait for payments to come in for goods and services.
“Creditors appear nervous, as reflected by the fourfold increase in winding up petitions in 2022 compared to 2021.
“The next few months will be a critical time for business resilience. Encouragingly, we have seen that many companies who have survived a challenging three years are talking to their key stakeholders to work through a solution. It’s vital that management teams facing financial challenges don’t put off these conversations as early engagement is essential.”
David Kelly, Head of Insolvency in PwC’s Restructuring & Forensics practice, said:
“The number of company insolvencies was 30% higher than in Q4 2021 with the number of CVLs remaining close to the highest quarterly level in more than 60 years.
“Given the spike in creditors’ voluntary liquidations, it’s a clear sign that many directors are taking the difficult step to accept they have reached the end of the road. They are engaging with advisers to take the appropriate steps to close businesses on their own terms and ideally preserve value for creditors, rather than roll the dice and potentially face a more distressed wind-down and expose themselves to personal financial risk.
“Annually the construction, retail, accommodation and food services sectors were the hardest hit industries, a telling sign of the impact of rising costs and shift in consumer habits and the continued challenges certain sectors are facing getting and retaining staff.
“We are seeing many companies putting themselves in the shop window for a possible merger or acquisition, which is a sensible move in this environment helping redistribute capital. However, during the current challenging market conditions where values and appetite are uncertain all options need to be considered including contingency planning for restructuring.”