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Number of monthly company insolvencies increases 16 per cent to 1,948 – Evelyn Partners

Nearly 2,000 businesses went insolvent in October as the cost of living crisis begins to bite as post-pandemic support comes to an end, according to statistics published by The Insolvency Service and shared by Bristol-based wealth management and professional services group Evelyn Partners.

“The insolvency statistics published by The Insolvency Service for October 2022 show that company insolvencies are increasing as we head into an economic downturn and with pandemic-era business protection measures behind us, said Claire Burden, a partner at Evelyn Partners.

“The figures show a 16 per cent jump from September, and represent a 38 per cent increase versus the same month last year.

“The number of company insolvencies continues to be driven by creditors’ voluntary liquidations (CVLs), with 1,594 recorded in October 2022, up 53 per cent from the pre-pandemic October 2019.”

Official figures show that 242 companies entered compulsory liquidation in the last month – four times as many as in October last year, as winding-up petitions presented by HMRC increase.

The liquidation statistics are particularly concerning after Evelyn Partners research suggests an increase in owner funding across the market, as businesses face challenges accessing capital.

For instance, a survey of more than 500 UK business owners with revenues of £5 million upwards shows that UK business owners are taking measures to invest their personal wealth into their businesses before letting staff go or cutting wages:

  • 23 per cent of business owners have already sold or re-mortgaged their home to generate funds for their business, with a further 22 per cent having invested their personal savings
  • As access to capital becomes more difficult and interest rates increase, a fifth have already taken out a personal loan to bridge finances, with 43 per cent considering taking this step

“While we understand that owning a business can be deeply personal, putting personal wealth to work should only be considered a last resort,” said Claire.

“Business owners need to consider why their business needs additional funding and whether it truly is a one-off – as well as how and when personal wealth will be repaid.

“If their businesses are struggling and they are forced to sell at a lower price, or even liquidate their assets more quickly than expected, business owners need to ensure they have the right kind of security in place to safeguard their savings.

“Despite lower rates of personal bankruptcies versus pre-pandemic levels, perhaps as a result of changes in eligibility criteria, Individual Voluntary Arrangements are on the rise, with the three-month period ending in October 2022 showing figures 13 per cent higher than the same period in 2019.

“As we look ahead to a winter of high energy costs, inflation and an economic downturn, directors worried about the financial position of their businesses should seek professional help as early as possible.

“This gives them the best opportunity to identify a range of solutions to shore up businesses, or increase the likelihood of a rescue before it is too late.”

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