2 Mins
Early in the pandemic, the government started publishing monthly insolvency statistics for England and Wales, Scotland and Northern Ireland.
The number of insolvencies gives an insight into the overall health of the economy, however, when the COVID-19 pandemic hit, it did not lead to the spike in insolvencies that was expected. In fact, the insolvency levels were suppressed by the unprecedented level of support provided by the government. As various initiatives were withdrawn, the numbers of insolvencies were predicted to increase but the numbers continued to be lower than historically experienced, particularly in Scotland.
Last June we drilled into what the monthly reports had been showing. We found that in the 12 months following the first lockdown, insolvency numbers were around 50% lower in Scotland than they had been pre-pandemic and in the year following that (to March 2022) around 13% lower. One of the reasons why we thought the figures remained lower was that creditors faced restrictions to winding up companies that owed them money, These restrictions were withdrawn in April 2022, and it was expected that this would lead to more liquidations.
At that time, figures in England and Wales had been more like the pre-pandemic level for around 6 months and the differences in regimes mean that insolvencies started by creditor petitions have always accounted for a smaller proportion south of the border. Given the significant shortfall over the previous two years and accounting for the impact of the economic headwinds at the time we expected that the increase would be significant and sustained.
What do the February figures show?
Firstly, monthly corporate insolvencies in England and Wales remain well above pre-pandemic levels and have been that way for around 18 months. Just like we said! However, the Scottish figure headline is that February 2023 is lower than pre-pandemic levels. There are always monthly variances and looking at the average number of insolvencies over the prior 12 months we can see that on average it is higher than pre-pandemic levels. However, only by 13% which is way below the level of increase that we were expecting. There was a bit of a spike in the last 3 months of 2022, largely driven by an increase in creditor petitions. There must be a further increase to come.
The figures also highlight the insolvency trends in specific sectors. Two sectors which have shown big increases in the number of insolvencies over the last 12 months are Food & Beveridge and Retail.
