In perhaps rather unsurprising news, the number of companies collapsing into insolvency towards the end of 2022 increased significantly. Having already seen 1,948 businesses closing down in October, the November figure was even higher with 2029 shutting up shop.
As well as showing an increasing trend for the year, these figures also represent an alarming jump year-on-year and also when we look back to pre-pandemic statistics. The figure of 2029 in November is 21% higher than in November 2022 and more than a third (35%) up on the number registered three years prior (2019).
Rising costs, waning support
The unsurprising nature of the news come from a backdrop of difficult trading conditions. Energy costs, rising inflation, reduced consumer confidence and volatility in forex are all being cited as the main drivers for companies
But some analysts in leading insolvency firms are also saying that the additional closures, above the expected averages, represent so called ‘Zombie’ business who were burdened by debt and were reliant on Coronavirus support which stopped in 2022. So, for many coming off the life support it was a ‘sink or swim’ moment and few realistically stood a chance. Rather than supporting resilient businesses and going concerns, covid support packages were actually propping up ailing entities for whom it was perhaps only a matter of time before they failed.
Holding out for Christmas
The trend is something we expect to see continue into 2023. January nearly always sees a further peek in insolvencies as companies, particularly retailers, reflect on Christmas trading or may reach a natural year end in line with the calendar year, unable to continue. Some may have been on the brink of insolvency during the Autumn but actively decided to ‘hang on in there’ hopeful of a Christmas spending boost or out of loyalty to staff. But weak sales over the Christmas period tends to be the final straw and as we enter the quieter periods of January and February it becomes impossible for them to see daylight.