Long-term impact of Covid creates spike in voluntary liquidations
Simon Monks, R&I director at Azets, said “Although the insolvency statistics for April 2022 show a slight decrease in corporate insolvencies compared with March 2022, the significant upward trend remains.
“Whilst the material increase on this time last year is understandable, due to government support available at that time, it is alarming that there is also a material increase on pre-pandemic levels.
“This suggests a realignment of economic resource and a clearing out of entities that are no longer economically viable, that might have been able to survive the pandemic due to support schemes.
“The notable increase in Creditors’ Voluntary Liquidation (CVLs) demonstrates that directors and other stakeholders are beginning to act to address corporate financial woes.
“Whilst the number of compulsory liquidations remains broadly flat, our expectation is that these will increase as Government and other creditor stakeholders assess support lines and look to recover where this makes financial and economic sense.
“We would expect the upward trend in corporate insolvencies to continue as the economy gradually returns to a business-as-usual state. But this should not necessarily be looked upon as a bad thing given the continued availability of capital, which can be utilised to put such resource to better use.
“There appears to be a realignment of underperforming business as we continue to move away from
the pandemic. However, even better performing businesses are being challenges, not least by the cost-of-living crisis, which has led to the biggest squeeze on real wages since records began.”
