The UK's latest quarterly company insolvency statistics, published on 29 October, suggest that the unexpectedly calm seas seen over the last 18 months (and maintained by unprecedented government economic support) may be starting to give way to stormier waters as corporate insolvencies begin to return to pre-pandemic levels.

The Q3 2021 data marks a noticeable bump from Q2 2021, with the overall number of registered company insolvencies in Q3 2021 17 per cent higher than the previous quarter. These statistics represent the highest overall insolvency levels since the initial lockdown began in March 2020, with the construction industry in particular continuing to report a sizeable number of insolvencies.

The increase primarily comes as a result of rising numbers of creditors’ voluntary liquidations (CVLs). CVLs continue to make up the vast majority of corporate insolvencies (92 per cent in the latest quarter), and now sit at their highest quarterly level since Q2 2009, with 3,471 CVLs taking place this quarter.

Other insolvency procedures such as compulsory liquidations and administrations continue to remain at historic lows (only 7 per cent of corporate insolvencies), likely as a result of the continued temporary prohibitions on creditors making winding up petitions and statutory demands. The number of administrations in Q3 2021 matches that of Q2 2021 (169), remaining 56 per cent lower than Q2 2020.

Company voluntary arrangements (CVAs) are also down by 20 per cent on Q2 2021 (from 25 to 20 CVAs reported) and 68 per cent on Q2 2020. The Government’s recent extension of its restrictions on landlords’ key remedies and the recently proposed arbitration process for landlord-tenant rent arrears disputes should provide a level of protection for tenants in financial difficulties post-pandemic, and could mean that CVA volumes stay suppressed going forward.

This dataset depicts a broader statistical picture of post-pandemic company health, covering the tail end of government support and the uptick in CVLs. In the coming months, the impact of the energy crisis and the phased withdrawal of temporary prohibitions are likely to push recorded corporate insolvencies materially higher. Inflationary pressures also loom, with materially rising input costs such as shipping, haulage, supply chain issues, wages, and commodities impairing cash flows, and few costs dropping to counterbalance those increases.

It also remains to be seen whether HMRC will continue to adopt its pandemic-era approach of caution when seeking the winding up of companies who have failed to pay their taxes. This is in stark contrast to HMRC’s historical position as one of the most frequent petitioners for compulsory liquidations.

These signs of return to pre-pandemic insolvency levels may be a warning of a cloud on the horizon, with further corporate insolvencies, which may have been deferred as a consequence of government measures, potentially to come down the track in 2022. Whilst some parts of the economy are still doing well, choppy waters lie ahead for those sectors that are struggling.