R3 responds to February insolvency statistics

15 March 2022

• Corporate insolvencies decreased by 3.2% in February 2022 to a total of 1,515 compared to January's total of 1,565, and increased by 121.2% compared to February 2021's figure of 685. They were also 12.6% higher than in February 2020 (1,346).
• Personal insolvencies increased by 15.8% to 9,825 in February 2022 compared to 8,486 in January, and were 43.7% higher than February 2021's figure of 6,839. They were also 14.4% higher than in February 2020 (8,590).

Christina Fitzgerald, Vice President of insolvency and restructuring trade body R3, responds to today's publication of the February 2022 corporate and individual insolvency statistics for England and Wales:

“The monthly fall in corporate insolvencies is being driven by a reduction in all types of corporate insolvency process, with the exception of administrations, whose numbers increased to a 15 month high.

“This increase suggests that there are a number of insolvent businesses which have some prospect for rescue, given this is one of the main statutory purposes of the administration process. Wherever possible the insolvency profession will work to secure the rescue of businesses in administration to help ensure better outcomes for the business, its staff and its creditors.

“However, despite the month-on month-decline, the figures released today show corporate insolvency numbers were higher than this time last year and the year before – and that levels of corporate insolvency have remained at pre-pandemic levels.

“Sadly, the ending of the peak of the pandemic and the lifting of the final set of restrictions hasn’t led to the shot in the arm the business community had hoped for. Although the economy grew in January and firms benefited from restrictions ending in February, it took time for footfall to increase – and will take a while before anything resembling normality returns. 

“Consumer spending has declined and consumer confidence is low as people worry about the economy and their own financial position, with inflation now a real problem for firms and individuals alike. This situation is unlikely to improve any time soon given the impact the war in Ukraine will have on energy costs.

“In addition to this, the restrictions on using winding-up petitions are coming to an end later this month – something which could see an increase in creditors turning to legal action to recover unpaid debts.

“Now is the time for directors to be alert to the signs of financial distress and to take action if they show themselves. We know conversations about a business’ financial position are some of the hardest to have, but speaking up about your concerns at an early stage typically leads to a better outcome than if you’d waited until the problem worsened.”

Personal insolvency

“The increase in personal insolvencies is being driven by a rise in Debt Relief Orders and Individual Voluntary Arrangements. This suggests that more people are looking for help with resolving their financial issues and to come to an arrangement to manage their debts.

“It’s clear that the economic issues of the last two years are starting to take their toll on people’s financial health. In addition to the issues created by the pandemic, rising fuel and energy costs are a big concern for many and wages are failing to keep pace with inflation. As a result, there are a lot of people who are worried about their financial prospects in the months ahead. 

“Our message to anyone in this position is simple: seek advice as soon as possible. The earlier you do, the more potential options you have to resolve your situation, and the more time you have to take a decision about how you move forward.”