Company insolvencies in England and Wales rose to 3,116 in April–June 2021, up 31% from the previous quarter after seasonal adjustment, the Insolvency Service reported on 30 July. Yet the liquidation rate for the year ending in June was 25.9 per 10,000 active companies, below the 36.9 recorded a year earlier. For businesses assessing customer and supplier risk, the figures are not contradictory. They cover different periods and different types of procedure. [S3][S5]
The annual rate counts companies entering compulsory liquidation or creditors’ voluntary liquidation over four quarters, then divides that total by the mean number of active companies registered with Companies House in the same place and period. For this release, the window was July 2020 through June 2021. It is a flow of liquidations measured against an average stock of companies, not the proportion of firms liquidated during the latest quarter. Nor is the reported one-in-386 figure a forecast of what will happen to a particular supplier over the next year. [S3][S5]
The quarterly total answers another question: how many new company insolvencies were recorded across the procedures covered by the release? It includes administrations, company voluntary arrangements and receiverships as well as liquidations. A company entering voluntary liquidation after administration is excluded from that headline total because its administration has already been counted. But the later liquidation is included in the liquidation-rate calculation. Dividing the headline 3,116 by the company population would therefore not reproduce the published annual rate, even before allowing for the different time windows. [S3][S5]
The latest increase was concentrated in creditors’ voluntary liquidations: 2,819 in the quarter, up 39% from January–March after seasonal adjustment. Compulsory liquidations, administrations and company voluntary arrangements all fell from the previous quarter. There is a timing qualification, too. The Companies House data assign cases to the quarter of registration, not necessarily the date a procedure began; compulsory liquidations in England and Wales use the court-order date. A dashboard built around these figures tracks recorded procedures, not the exact moment each business first ran into financial trouble. [S3][S5]
Sector comparisons need their own denominator. Construction accounted for 1,801 insolvencies, or 16% of cases with an industry recorded, in the year ending June 2021. That does not mean 16% of construction companies failed. The analysis excluded 233 cases whose industry was unknown, non-trading or dormant, and the Insolvency Service warned that large sector totals were likely to reflect the number of active companies in each category rather than their relative likelihood of insolvency. For credit planning, the construction share describes the mix of recorded cases; it does not establish a construction customer’s probability of failure. [S3]
The low level of insolvencies relative to the pre-pandemic period also came with a warning against a simple recovery story. The Insolvency Service said restrictions on statutory demands and certain winding-up petitions, alongside enhanced financial support, were likely to explain part of the reduction. It did not record whether each insolvency was directly related to the pandemic and could not state its direct effect on volumes. The practical implication is to keep this historical measure separate from a forecast of unpaid invoices in a company’s own customer book. [S3]
Source documents
- Commentary — Company Insolvency Statistics April to June 2021https://www.gov.uk/government/statistics/company-insolvency-statistics-april-to-june-2021/commentary-company-insolvency-statistics-april-to-june-2021
- Methodology and Quality Document — Company Insolvency Statistics April to June 2021https://www.gov.uk/government/statistics/company-insolvency-statistics-april-to-june-2021/methodology-and-quality-document-company-insolvency-statistics-april-to-june-2021