Listening to the news all we seem to be hearing is inflation has reached levels not seen in 40 years, petrol prices surging to record levels following the Russian invasion of Ukraine and the demands of employees, including industrial action, for wage increases are putting pressure on businesses and, in particular, their cash flow. Add to this the cost of raw materials and goods that place a further squeeze of profit margins and you can only conclude it is tough out there in the business world.
The Insolvency Service latest statistics, released last week seem to reflect the tough time businesses are facing at the moment with 1,827 company insolvencies in July 2022, a rise of 67% compared with the same month in Covid affected 2021 but also 27% higher than July 2019. The majority of this figure is creditors’ voluntary liquidations (CVL), which increased to 1,609, some 60% higher than both 2021 and 2019. Indeed, the level of CVLs for the second quarter of 2022 was the highest on record.
The number of compulsory liquidations fell by approximately half from the number in July 2019. Given the majority of compulsory liquidations pre-pandemic were based on petitions from HM Revenue & Customs, this is a sign that HMRC remain more prepared to compromise than in future. How long this approach will remain is uncertain so acting now is imperative.
While these figures appear daunting, some of the liquidations were companies where the core business was sound; it was purely a cash flow issue, combined with an unmanageable tax liability that prevented a turnaround situation. This is due to the change in law whereby HMRC now hold secondary preferential status for a large proportion of their unpaid debt.
Should you or a client require any advice or assistance on a company suffering as a result of the cost-of living or any insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss and advise on your situation on 01604 212150 or email to enquiries@pbcbusinessrecovery.co.uk.
