Myerson Grows Their Insolvency Team as the Number of UK Company Insolvencies Rises

Rise in the number of UK company insolvencies

The UK economy has faced an unprecedented series of crises over the last few years, requiring massive government support and intervention for businesses. This support has included an unparalleled amount of public spending that, according to the icaew August 2021, could be around £372 billion, with an estimated £151bn of that figure targeted for business support. 

Local media, including The Guardian and The BBC, has reported on the government's official statistic results from the Insolvency Service, published on 22 April 2022.

The report showed that the first quarter of 2022 has seen no less than 5,197 company insolvencies, the highest number since the third business quarter of 2017 (4,033 total company insolvencies in Q1, 2017). 

The government report has found that some 2,114 UK businesses became insolvent in March 2022, more than double the figure in March 2021 (999) and 34% higher than the pre-pandemic figure of 1,582 recorded in March 2019.

Altrincham law firm Myerson Solicitors supports these findings, seeing an increase in insolvency matters being referred to the firm. 

This increase in company insolvencies is at least in part due to a significant rise in business costs and overheads, such as energy costs, hiked interest rates on loans and increasing inflation, sending those companies spiralling into the red. These cost increases, plus the impact of HMRC's move to recover outstanding arrears from those failing to agree to a TTP (Time to Pay arrangement), have left many businesses with few options. 

Richard Wolff, Partner and Head of Insolvency and Restructuring at Myerson, said:

"The rise in the corporate insolvency figures referred to in the government’s Insolvency Service report comes as no surprise given the overall economic backdrop. Prior to the pandemic, the view of many professional advisers provided to struggling but viable businesses requiring support for their restructuring (e.g. via Company Voluntary Arrangements) was that HMRC could be less than commercial, resorting to aggressive recovery methods. These included both petitioning for winding-up and bankruptcy and other HMRC avenues for recovery aimed at company directors such as personal or joint liability notices, deemed by many as unhelpful and obstructive to the business recovery process."

HMRC's reputation as an aggressive petitioner is open to some debate. In a letter written to the Business Secretary, Kwasi Kwarteng referenced in a prominent newspaper article in May last year (May 2021, the Financial Times), the Institute of Directors and R3 (the UK trade body for insolvency and restructuring professionals) called for support from HMRC to work with companies struggling to repay debts related to the pandemic. The article referenced a government statement that read: 'HMRC only pursues insolvency action as a last resort after considering all alternative routes to the recovery of a debt, and of all insolvency proceedings that go ahead, only around 10% of them are petitioned by HMRC'. 

Richard continued, 

"As individuals throughout the UK are hit by an unprecedented rise in the cost of living, so too are UK businesses. In July 2021, the total number of company insolvencies were 24% lower than in 2019. This dip was largely due to the government's temporary legislative measures through business support packages such as the moratorium on winding-up and statutory demand restrictions provisions contained in the Corporate Insolvency and Governance Act 2020. Now that the temporary support measures have largely come to an end, and with businesses left without any government support, we suspect more businesses will now find themselves in further financial difficulty and potentially facing insolvency".

Due to the expected further increase in insolvency-related instructions, Myerson has invested in growing its insolvency and restructuring practice.   

Akeel Latif, Partner and Head of the Corporate and Commercial team at Myerson Solicitors, said:

"The pandemic has had a significant effect on businesses and we are now starting to see the impact. At Myerson, we are seeing a rise in new business clients that are seeking advice on insolvency and restructuring support and, with the restrictions on pursuing the recovery of debts largely removed, this trend is only likely to intensify.

We have also seen more and more businesses unable to pay their rent and some, who could pay, electing not to, so landlords too, many of whom have significant borrowing exposure to banks, have suffered due to their rental income streams being adversely affected.

To help our clients, in addition to our advisory services, information and free resources and materials, such as our free Commercial Rent Arrears Hub, we have now expanded our knowledge in-house with the recruitment of Partner Richard Wolff. Richard is spearheading Myerson's Insolvency & Restructuring Team; with his accumulated knowledge and experience, we are now in a position to provide tailored insolvency and restructuring advice and support for our business clients".

If you would like to find out more about Insolvency and Restructuring, the services we offer or if you are a commercial landlord, business or tenant and would like to know more about the Commercial Rent Moratorium, you can contact us using the contact form below.