Compulsory liquidations jump fivefold in November as small business feels pressure

Compulsory liquidations in November 2022 rocketed to more than five times as many as last year and were 7% higher than in November 2019, new figures released today show, as small and medium-sized businesses feel the pressure of rising prices, higher interest rates and dwindling consumer demand.

The number of registered company insolvencies in November 2022 was 2,029, 21% higher than in the same month in the previous year, and 35% higher than 2019, according to data released by the Insolvency Service this morning, while debt relief orders grew 10% on last year to 2,269.

David Kelly, Head of Insolvency at PwC said: “This is a sobering reminder that rising interest rates, energy costs and supply chain issues are starting to bite as we head into 2023.

“Vulnerable sectors, such as retail, hospitality and construction, are particularly feeling the strain, notwithstanding the brief respite the World Cup afforded a number of businesses in the hospitality sector.

“The decline in consumer sentiment coupled with high costs of raw materials, energy and labour will prove hugely challenging for businesses in these sectors going forward, so it’s vital that they look at things like refinancing and restructuring in order to put themselves in the best position to offset external pressures.

The bulk of corporate insolvencies in November 2022 were creditor voluntary liquidations (1,595) which revealed a staggering 50% increase from November 2019. Creditor voluntary liquidations take place when the shareholders of a business decide to wind up the company and use its assets to pay off creditors.

Inga West, Counsel at law firm Ashurst, said: “This is a relatively new development. It shows that the insolvency ‘heat’ is still very much on SME’s who typically have a smaller economic shock-absorbing capacity than their larger corporate counterparts.  But this may change.”