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September insolvencies 56% higher than last year

The number of company insolvencies in September 2021 sat at 1,446 which is 99 more than recorded in August and 56% higher than last year’s figure of 926.

The figure is 4% lower than the number registered pre-pandemic which sat at 1,510. The September figure continues the increase in the number of company insolvencies over the last three months with July 2021 recording 1,096.

The September figures also include the high-profile insolvencies of the nine energy companies that collapsed last month. 

The recent insolvency figure reported that in September 2021 there were 1,328 creditors’ voluntary liquidations (CVLs), which is the highest level seen in the series since January 2019.

For individuals, 614 bankruptcies were registered, which was 42% lower than September 2020 which reported 1,036 bankruptcies and 55% lower than September 2019.

Claire Burden, partner in the advisory consulting team at Tilney Smith & Williams said: ‘The statistics will include some high profile energy businesses, due to the high cost of gas.

‘We expect this energy cost issue to reverberate into additional sectors such as manufacturing, consumer products and others, and cause further failures when combined with existing pressures of increased transport costs and supply issues.

‘A third of UK’s small businesses have been classified as highly indebted as per a recent Bank of England report, alongside its quarterly financial stability update. The analysis showed that 33% of SMEs held debt levels of more than 10 times their cash balances, versus 14% before Covid-19.

‘In this continuing volatile environment, SMEs need to focus on cash flow plans, including repayment of Covid loans, HMRC arrears, and rising operating and product costs alongside repaying debt that was in place pre-pandemic. As always, businesses can avoid insolvency if they seek advice early enough.’                                             

The number of debt relief orders (DROs) in September 2021 was at its highest level since the start of the pandemic, with 2,150 registered.

This followed changes to the eligibility criteria on 29 June including an increase in the level of debt at which people can apply for a debt relief order from £20,000 to £30,000. The number of DROs registered was 41% higher than September 2020 which reported 1,527 but remained 12% lower than pre-pandemic levels.

On average there were 6,853 individual voluntary arrangements (IVAs) registered per month in the three-month period ending September 2021, which is 48% higher than the three-month period ending September 2020 which reported 4,639 over a three-month period.

Between the launch of the Breathing Space scheme on 4 May 2021, and 30 September 2021, there were 27,246 registrations, 26,896 which were standard breathing space registrations, and 350 mental health breathing space registrations.

Louise Brittain, restructuring and insolvency partner at Azets said: ‘There is a big increase in individuals finding it necessary to seek formal personal insolvency relief, either through the debt relief order (DRO) process or the individual voluntary arrangement (IVA) process, with both returning to pre-pandemic and above levels.

‘This has brought the total number of personal insolvencies up to 9,954 this month compared to 8,272 in January 2019. If increases remain at this level, personal insolvency numbers for the year could well exceed 100,000.

‘It is clear the withdrawal of the furlough scheme and increases in fuel, food and essential living costs are pushing individuals into formal insolvencies. With the proposed 1.25% increase in NI next year, we can expect to see these numbers continue to rise.

‘Households are under financial stress, and with the NI increases looming we can expect to see reduced spending on the high street over Christmas as individuals brace themselves for a tough year next year.’

 

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