The number of businesses being wound up has increased again as firms are hit by the withdrawal of COVID-era support, higher interest rates and dwindling consumer spending.
The level of business insolvencies is higher than pre-pandemic times and when the state was supporting businesses throughout the COVID-19 years, figures from the Insolvency Service show.
Registered company insolvencies rose 27% in England and Wales from June last year to last month: 2,163 were recorded.
Similarly, liquidations increased. Compulsory business liquidations rose 77% over the year to June to 260, up from the historical lows during the pandemic.
There was also a 21% jump in the number of creditors’ voluntary liquidations and a greater number of company voluntary arrangements than last year.
Commentators say falling consumer demand, higher prices and rising borrowing costs are hurting companies. Higher interest rates have meant access to debt has been harder while the stubbornly high rate of inflation has meant increased costs.
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Smaller businesses have been hit hardest as 97% of the insolvent companies had a turnover of less than £1m, big four accountancy company PwC pointed out.
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The number of insolvencies is expected to rise, the head of insolvency at PwC said. “We’re starting to see a large number of companies having to restructure their debt, which is leading to increased liquidity pressure and, consequently, more voluntary liquidations.”
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The sentiment is echoed by wealth management and professional services firm Evelyn Partners.
“As wage rises typically lag inflation, we can expect the business environment to continue to be extremely challenging, particularly but not exclusively in the construction, retail, leisure and healthcare sectors,” a restructuring and recovery partner at the firm said.
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At the same time, personal insolvencies decreased compared to the period before the pandemic. Less than half the number of bankruptcies were reported in June compared to pre-2020 levels, though the number is 29% higher than June 2022.
Also experiencing a fall was the number of individual voluntary arrangements which dropped 22% in the three-month period ending June 2022.
There was, however, a similar number of personal debt relief orders – 2,320 – similar numbers to 2019 but up 21% since last June.
The Insolvency Service is a government office which comes under the remit of the Department for Business and Trade.
