R3 responds to Q3 2022 insolvency statistics

28 October 2022

• There were 5,595 seasonally adjusted corporate insolvencies in Q3 2022, a fall of 0.9% compared to Q2 2022's figures of 5,645 and a 40.3% increase compared to Q3 2021 (3,987). Q3 2022’s figures were also 27.9% higher than Q3 2019’s figure of 4,375.
• Personal insolvencies decreased by 4.9% to 27,927 in Q3 2022 compared to 29,361 in Q2, and were 2.3% higher than Q3 2021's figure of 27,302. Q3 2022’s figures fell 12.4% when compared to Q3 2019's total of 31,864.

Christina Fitzgerald, President of insolvency and restructuring trade body R3, comments on the Q3 2022 corporate and personal insolvency statistics for England and Wales:

Corporate Insolvencies                                 

“Two years of economic turbulence are translating into a rise in corporate insolvencies. Government support paused rather than prevented the economic effects of the pandemic from leading to more businesses entering insolvency processes, but now that support has ended, we’re starting to see numbers exceed pre-pandemic ones.

“Although the figures published today show a quarterly fall in corporate insolvencies – driven mainly by a reduction in Creditors’ Voluntary Liquidations and administrations, as well as the summer bringing the traditional slowdown in inquiries and appointments – they are still the second highest quarterly figures for corporate insolvencies in a decade.

“Despite the quarterly fall in Creditors’ Voluntary Liquidations, figures for this process are higher than this time last year, the highest we’ve seen in Q3 for 10 years and close to the highest figure we’ve seen since 1960. Compulsory liquidations have also risen compared to the last quarter and are at the highest level since before the pandemic.

“The cause of the increases in figures for these processes is a perfect storm of directors running out of road and creditors being able to pursue unpaid debts after the temporary legislation designed to deter this ended in the summer. 

“It seems inevitable that numbers will increase in the coming months as the state of the economy, increased costs, and people’s reluctance to spend money because of the cost of living deals a further blow to those businesses that have struggled since the beginning of the pandemic.

Personal insolvencies

“Although personal insolvency numbers have fallen compared to the last quarter due to a decline in Individual Voluntary Arrangement (IVA) and Debt Relief Order (DRO) numbers, the figures are still higher than they were this time last year because of an increase in the number of people entering an IVA.

“This, coupled with the increase in bankruptcies between this and the last quarter, suggests that the cost of living crisis is starting to be reflected in personal insolvency numbers, as people turn to personal insolvency processes to help resolve their financial issues.

“People are very worried about money right now. Prices are rising at the fastest rate of 40 years and increased costs of heating, eating, and fuelling vehicles are a serious and ongoing concern for many.

“While unemployment is down, wages haven’t kept pace with inflation and more people are borrowing money as the pounds in their pockets don’t go as far as they did 12 months ago. 

“Increased borrowing can put people at risk of insolvency as it only takes a missed payment, a cut in hours at work or an unexpected bill to turn a challenge into a problem and move someone from being on a financial knife edge to being unable to pay their debts.

Seek early advice

“We urge anyone who is worried about their finances to be brave and seek advice. It’s incredibly hard to talk about your money worries – whether that relates to your business or your personal circumstances – but having those conversations while your worries are new generally leads to more options and a better outcome than if you’d waited until the situation worsens.

“Most R3 members will offer an hour’s free consultation to potential clients to allow them to understand more about their situation and outline the potential options for improving it.”