‘Tsunami’ of insolvencies hits England and Wales as pandemic support withdrawn

The number of businesses going into insolvency in England and Wales more than doubled last month, according to official government figures, as the end of pandemic support begins to be felt.

The numbers of businesses being shuttered skyrocketed to 2,114 last month, up from 999 during March last year. The number was 34% higher than pre- coronavirus pandemic in March 2019.

Tailwinds of increased taxes, higher inflation and the ongoing war in Ukraine rattled the economy, as well as the end of pandemic-era support measures.

Margaret Carter, restructuring and insolvency director at accountancy firm Azets, said industyr had been expecting this “tsunami” of insolvencies following the withdrawal of government financial pandemic support. 

“The true impact of the of the pandemic now appears to be coming to fruition, following an extended period of business grants and government backed lending propping up businesses,” she said.

In March 2022 there were 1,844 Creditors’ Voluntary Liquidations (CVLs), more than double the number in March 2021 and 62% higher than March 2019.

Numbers for other types of company insolvencies, such as compulsory liquidations, remained lower than before the pandemic, although there were almost four times as many compulsory liquidations in March 2022 compared to March 2021, and the number of administrations was 74% higher than a year ago.

Jeremy Whiteson, partner  at the restructuring and insolvency practice at Fladgate, said: “As government support was wound down and creditors and landlords regained the ability to take action against businesses, the surge in insolvencies in March 2022 compared with the same period last year was to be expected.

“When compared with pre-pandemic levels, it’s clear we’re witnessing a catch up effect. Some companies have been beyond rescue for some time, but were able to delay formal insolvency thanks to the government support measures and the restrictions placed on creditors.”

In March there were also 86 company insolvencies registered in Scotland, twice as high as the previous year. However, this was 11% lower than in March 2019.