Company insolvencies in England and Wales last month rose by 40 per cent year-on-year to the highest level since monthly records began in January 2019.
Data from the Insolvency Service yesterday showed that 2,552 companies were declared insolvent last month, overwhelmingly through creditors’ voluntary liquidations, in which a company’s directors agree to wind up the business without a formal court order.
However, the government agency said there had also been a 34 per cent increase in compulsory liquidations, partly due to more requests from tax authorities to recover funds from companies unable to pay their tax bill.
Insolvencies in the UK were low during the pandemic because of an £80 billion business loan programme and a temporary bar on court-ordered liquidations. Numbers have risen since, reaching a 13-year high in the final quarter of 2022 and staying close to that in the first quarter of 2023.
“Given that trading conditions remain extremely challenging, the number will likely continue to climb through the second half of the year,” said David Kelly, head of insolvency at the accountants PwC.
PwC said construction and retail were the hardest-hit sectors, and the number of food manufacturers in trouble was also increasing. About 99 per cent of liquidations featured companies with annual sales of under £1 million, it added.
There was a wave of distress in construction, with 42 firms that provide domestic and commercial building services appointing administrators, according to data from Creditsafe.
Howard Russell Construction became one of the largest casualties in the industry when it brought in advisers from FRP Advisory to handle its insolvency. The Northumberland-based business was a contractor on a number of projects in the northeast and had a turnover of more than £40 million in the year to March 2022.
Nicky Fisher, president of R3, the restructuring trade body, said: “The fallout from battling the effects of the pandemic, coupled with rising costs, increased creditor pressure and high inflation, is causing more businesses to turn to an insolvency process to help resolve their financial issues.”
Lindsey Cooper, a restructuring advisory partner at RSM, said: “With the continued increase in interest rates it is becoming more and more difficult for some businesses to refinance and we expect more failures among those businesses which are already in a vulnerable cash position.
“Administrations, which also allow a restructuring of a business, have also increased and we expect to see more management teams making use of these corporate rescue tools in the coming months.”