Today’s insolvency statistics contained few surprises, creditors’ voluntary liquidations (CVLs) have continued to outnumber other types of company insolvencies by some margin and have distorted the overall picture, which is that (putting aside CVLs where directors/shareholders elect to pull the plug themselves on a company’s survival) figures for other types of company insolvencies remain below pre-pandemic figures.
But comparing June this year with June last year, there has been a significant rise in compulsory liquidations and a steady increase in the number of administrations, whilst CVAs have fallen out of favour. The era of the big retailer CVAs launched by the likes of Debenhams, New Look and Caffe Nero has come to an end.
The big rise in compulsory liquidations was not altogether surprising since creditors are no longer hamstrung by pandemic measures that limited their ability to obtain a winding-up order from court. I believe it will be interesting to see if this trend continues, especially if banks start to get in on the act when more companies default on their pandemic loans.
Everyone knows the storm clouds are brewing what with rising inflation, higher interest rates, a fall in consumer spending and global supply chain disruption. Barring a sudden improvement in the UK’s economic fortunes, I think it is inevitable that company insolvency numbers are only set to rise in the second half of this year.
This comment was first published in Credit Collections and Risk Magazine and can be accessed here.