The latest figures published by the BEIS Insolvency Service “highlight the toll the current business climate is taking on firms in Wales”, says insolvency and restructuring trade body R3.
Insolvency litigation specialist and chair of R3 for Wales, Charlotte May has responded to the publication of the January 2022 corporate and individual insolvency statistics for England and Wales.
The chair highlighted that, over the last two months, businesses have had to trade through “a perfect storm of issues” which will have affected them and their income. These include new Covid measures, a slowdown in consumer spending and rising inflation as well as steep increases in energy prices.
Ms May said: “After nearly two years of trading through a pandemic, these factors may increasingly become too difficult for many directors to deal with. Against a backdrop of continued pandemic-related uncertainty, there is likely to be a significant number of directors who will be increasingly doubtful that their business can survive much longer.”
Figures published in the report revealed an increase of 105.8% in corporate insolvencies compared to the same period last year, and an increase of 3.4% when compared to pre-pandemic levels.
In January 2022, corporate insolvencies increased by 4.8% to a total of 1,560 compared to December’s total of 1,488. It increased by 105.8% compared to January 2021’s figure of 758 and 3.4% higher than in January 2020 (1,508).
Ms May said the increase in corporate insolvencies is being driven by a rise in compulsory liquidations, which are 131.4% higher compared to the same period last year.
This suggested that creditors are now starting to take action over unpaid debt, having been legally prevented from doing so since the start of the pandemic.
She said: “Numbers of Creditors’ Voluntary Liquidations have remained similar compared to this time last month, which suggests that many company directors are continuing to choose to close their businesses rather than attempting to carry on trading in the current climate.”
Personal insolvencies have also seen a slight month-on-month increase — rising by 1.8% when compared to January 2021 and driven by an increase in bankruptcies.
The report showed that personal insolvencies increased by 0.3% to 8,477 in January 2022 compared to 8,451 in December 2021, and 1.8% higher than January 2021's figure of 8,331.
Ms May said: “When it comes to personal insolvencies, the slight increase we’ve seen in the figures published today is being driven by a rise in the number of people entering a bankruptcy over the last month, and suggests that more people are unable to pay their debts and are turning to this process to return to a more even financial keel.”
“The figures reflect the ongoing toll the pandemic is taking on personal finances. People in Wales are worried about how rising costs across the board will affect them, particularly energy prices, so it’s no wonder that people are worrying more about money,” she said.
She added: “We would urge anyone concerned about their finances – whether those are business or personal ones – to seek advice about their situation as soon as possible.
“Talking about your money worries is incredibly tough, but having a conversation about your concerns as early as possible will give you more potential options, more time to take a decision, and a greater chance of improving your situation than if you’d waited until it worsened.”
