Corporate insolvencies rise by 27pc
Corporate insolvencies in England and Wales rose by 27 per cent in June, year-on-year, while compulsory liquidations were up by 77 per cent.
According to new data from the Office for National Statistics (ONS) and HMRC, in the three months up to the end of June, 6,403 businesses entered insolvency – a 16 per cent year-on-year rise. This represents the first time quarterly insolvencies have topped 6,000 since the financial crisis.
There were 130 company administrations in June 2023, which is 44 per cent higher than in June 2022.
A number of business finance experts have warned that rising insolvencies could lead to higher unemployment figures, putting further pressure on the economy during a cost-of-living crisis.
“The combination of higher interest rates and a slowing economy is taking its toll, with quarterly insolvencies nudging over 6,000 for the first time since the financial crisis,” said Nicholas Hyett, investment manager at Wealth Club.
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“The only other time things have looked this bleak was during the early 90s recession.
“The increased pressure doesn’t seem to have found its way into employment numbers yet, and the labour market remains strong, but we’d expect that to change in the months ahead.”
Meanwhile, Nick O’Reilly, director of restructuring and recovery at advisory firm MHA, has called for an overhaul of business rates and a reform to Covid-19 repayment terms to prevent the insolvency crisis from spiralling out of control.
“Insolvencies will continue to rise throughout 2023 as the effects of Covid-19 recovery loans continue to bite businesses and the economy,” O’Reilly warned.
“The fall in customer demand, an economic downturn and increased interest rate of five per cent, on top of high inflation and the cost of living crisis, has meant businesses and small- to medium-sized enterprises (SMEs) have had little time to build a healthy cash reserve or recover from the post-pandemic impact.
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“Many are considering closing or have closed their doors for good, and its crucial government initiatives are introduced quickly to help stem the flow.”
Business advisory firm ReSolve said that it is in discussions with businesses across a multitude of sectors, including sport, technology, energy, retail and leisure, as many seek urgent help to weather the economic environment.
“We are also seeing increasingly larger businesses struggling due to the rising cost of debt and the ever-rising interest rates are not going to help ease these pressures any time soon,” said Mark Supperstone, managing partner at ReSolve.
“Nevertheless, if businesses act fast to seek advice as soon as they become cash constrained, or see a downturn in trading, then there are usually options available which will enable them to keep trading or to realise value. As a rule of thumb, the earlier our clients seek help, the more options there are.”
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