The latest company insolvency statistics are out - the only way is up

The latest company insolvency statistics are out - the only way is up

A tactical bankruptcy?

The Insolvency Service published its latest company insolvency statistics at the end of January, reporting both on Q4 2021 as well as 2021 as a whole.

The statistics can be accessed here and we highlight some of the key takeaways below.

1. Q4 2021 Company insolvency statistics

Comparing Q3 2021 with Q4 2021, the statistics show the following:

  • Q4 2021 saw an increase in creditors’ voluntary liquidations (CVLs – effectively, where the shareholders of a company resolve to wind up a company voluntarily) compared with the previous quarter – and the highest quarterly figure since company insolvency statistics have been published in their present form since 1960. 
  • Company voluntary arrangements (CVAs), administrations and compulsory liquidations were also up in Q4 2021 compared with the previous quarter, but in each case the numbers were below those in Q4 2020. 

2. 2021 Company insolvency statistics

Taking last year as a whole, the numbers confirm the following:

  • Overall there were more company insolvencies in 2021 than in 2020, but still below pre-pandemic levels.
  • Last year’s increase in company insolvencies against 2020 was driven by a significant increase in CVLs – the highest annual number since 2009. 
  • All other forms of company insolvencies (compulsory liquidations, administrations, CVAs and administrative receiverships) were lower in 2021 than in 2020 as well as pre-pandemic levels. Tellingly last year saw the following:
    • Just one administrative receivership appointment
    • The lowest annual number of administrations since 2003
    • The lowest annual number of CVAs since 1993
    • The lowest annual number of compulsory liquidations since the Insolvency Service first started publishing its insolvency statistics in 1960
  • Most industries saw an increase in company insolvencies during 2021 compared with 2020, although the sectors which experienced the biggest increases were those in the professional, scientific and technical and construction sectors. 

3. Concluding themes

To summarise, therefore, the latest company insolvency statistics suggest the following:

  • Rather predictably, what with government measures designed to support businesses through the pandemic remaining in place for much of last year, fewer companies went to the wall than was the case pre-pandemic.
  • Unless companies chose to pull the plug themselves, other stakeholders seem to have been reluctant to do so. Hence the dramatic fall in the number of compulsory liquidations compared to previous years and the big increase in the number of CVLs. It will be interesting to see whether this theme continues in 2022, bearing in mind that most business support measures introduced during the pandemic have either now ended or have been tapered off, whilst new challenges are emerging such as rising interest rates. 
  • CVAs, much in vogue previously, seem to have become less popular, perhaps fuelled at least in part by the restrictions on forfeiture of commercial leases which continue until 25 March 2022. Another explanation for the fall in CVA numbers last year against pre-pandemic levels is the return of Crown Preference, giving HMRC secondary preferential status as an unsecured creditor. Some have speculated whether this has dampened potential enthusiasm for this form of insolvency procedure, as it makes it more difficult to come up with an arrangement that will appeal to other unsecured creditors.
  • Administrative receivership has become a seldom used insolvency tool. But at least this is somewhat offset by two new procedures introduced by the Corporate Insolvency and Governance Act 2020 – the standalone moratorium and the restructuring plan. Between 26 June 2020 and 31 December 2021, 15 such moratoriums were obtained in England and Wales and 10 companies registered a restructuring plan at Companies House. These new procedures are still finding their feet it seems. 

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