Data released on Friday (28 October) showed that bankruptcies were higher in Q3 and individual insolvencies were 2 per cent higher than in Q3 2021.
It also revealed that one in 405 adults (at a rate of 24.7 per 10,000 adults) entered insolvency between 1 October 2021 and 30 September 2022 — an increase from the 24.0 per 10,000 adults who entered insolvency in the 12 months ended 30 September 2021.
During Q3 2022, there were 27,927 (seasonally adjusted) individual insolvencies. There were also 18,347 breathing space registrations in Q3 2022 — 18 per cent higher than in Q3 2021. Of the 18,347 breathing space registrations, 18,050 were standard breathing space registrations and 297 were mental health breathing space registrations.
Samantha Keen, UK turnaround and restructuring strategy partner at EY-Parthenon and president of the Insolvency Practitioners Association (IPA) said the year-on-year increase in insolvencies in Q3 2022 is unsurprising given the challenging trading conditions and market volatility facing many businesses.
“This rise in insolvencies has, once again, largely been due to a significant year-on-year increase in the number of Creditors’ Voluntary Liquidations (CVLs) which accounted for 86 per cent of all insolvencies in Q3 — a trend we have seen continue since the end of all COVID-19 government support measures earlier this year,” she said. “We are now also seeing numbers of compulsory liquidations increase with numbers four times higher than they were at the same time last year.
“As companies navigate multiple headwinds including inflation, rising costs and labour challenges, many are now also dealing with falling consumer demand. This is set to worsen with the UK economy likely to be in recession until the middle of 2023, according to the latest EY ITEM Club Autumn Forecast.
“These headwinds are now having a direct impact on profitability. EY-Parthenon’s Profit Warnings report, released earlier this week, found that warnings from UK-listed companies increased 69 per cent year-on-year in Q3 2022 with over half of warnings (57 per cent) linked to rising costs. Consumer-facing companies have been most affected, with warnings rising almost three-fold in Q3 2022 year-on-year.
“The number of companies who have issued their third consecutive profit warning in the last year now stands at 28, compared to 18 at the end of Q2 2022. On average, one-in-five companies delist within a year of their third warning, most due to insolvency.
“As many businesses gear up for their busiest quarter in the lead up to Christmas, it is crucial they use this period of high demand to build operational and financial resilience to face more challenging times ahead.”
