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December insolvency stats mark end of tough 2021

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Insolvencies last month saw an 11.4% drop against November 2021 but compared to December 2020, the number of businesses going bust increased by 20%.

18th Jan 2022
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The December insolvency figures showed the effect the sudden rise in Omicron had on businesses at the end of 2021 as high street hospitality saw a 40-60% drop in trade due to Christmas party cancellations and reduced footfall. 

The Insolvency Service revealed there were 1,486 registered company insolvencies in England and Wales in December. 

This figure was 20% higher than the number registered in the same month in the previous year and 33% higher than the pre-pandemic number registered in December 2019. 

However, the number of insolvencies fell compared to November’s total of 1,678, which was the first time since the numbers were higher than pre-pandemic levels. 

The rise was partly driven by the 1,365 creditors’ voluntary liquidations (CVLs) which were 37% higher than in December 2019 and 73% higher than the same month two years ago. 

"This is a trend we have seen over most of 2021 as directors have voluntarily closed businesses that are not fit to survive the current climate,” said Pranav Nadkarni, director in the advisory consulting team at Tilney Smith & Williamson.

The Insolvency service noted that other types of company insolvencies, such as compulsory liquidations, remained lower than before the pandemic.

Omicron wave impacts businesses

High street hospitality businesses and retail took the brunt of the Omicron wave in December, and Nadkarni said the situation was only aggravated by reduced footfall, employees testing positive and needing to self-isolate, and delays in receiving the government grants the Chancellor announced at the end of the month

All this combined was “quite catastrophic for those businesses that had already been hampered by a weak trading season,” said Nadkarni. 

Tilney Smith & Williamson expects some stabilisation in hospitality as the level of immunity increases with booster jabs and previous infections. “This is especially true in sectors like retail and hospitality, who normally have their busiest periods in December, but faced an unhappy Christmas this year,” said Nadkarni. 

But there are other pressures causing concern for businesses at the start of 2022, including cost inflation, supply chain disruption and a tight labour market, on top of several covid relief schemes ending in March 2022. 

“Businesses should continue to assess their cashflow positions and develop forecasts and scenario analyses to assess the potential impact of these macro-trends on liquidity and solvency,” said Nadkarni. 

R3’s Christina Fitzgerald said December’s insolvency figures “marked a tough end to a torrid year for many businesses”. 

“Increasing covid cases, rising costs and falling consumer confidence hit footfall and sales, and company directors and management teams also had to work in the midst of new restrictions, which will have affected day-to-day operation, customer behaviour and revenue levels.”

Meanwhile, personal insolvencies slightly fell to 8,434 in December 2021, which was 10.1% less than the 9,385 in November 2021 and 12.4% less than 9,625 in December 2020.

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By Hugo Fair
18th Jan 2022 17:02

The problem with all these stat-driven stories is that the stats themselves are not sufficiently disaggregated to ensure meaningful interpretation.
For instance, all those references to "businesses" ... does anyone know which of them had any real employees (as opposed to only shareholders/spouses), or for how long they had traded - and has anyone segmented the results by say bands of profit, or %age of t/o that is exports, or whatever.
The conclusions might be very different (even more interesting) if based on that finer level of detail?

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