Company insolvencies hit 14-year high
Company insolvencies hit their highest levels in 14 years in the second quarter, as restructuring experts report increasing requests for advice from troubled businesses.
Figures published by the Insolvency Service for the second quarter of 2023 revealed there were 6,342 company insolvencies, representing a nine per cent increase quarter-on-quarter and a 13 per cent rise year-on-year.
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This was a 51 per cent increase on the fourth quarter of 2019, which was the last complete quarter before Covid restrictions on winding up petitions and other creditor remedies slowed the number of insolvencies.
Administrations and company voluntary arrangements (CVA) also reached their highest figures since the quarter immediately before the coronavirus lockdown.
“This matches our experience,” said Jeremy Whiteson, restructuring and insolvency partner at law firm Fladgate. “There have been an increase in requests for advice in relation to troubled businesses.
“The rise in interest rates seems to have exacerbated troubles for many businesses – particularly those exposed to high borrowings.
“However, it has also affected the general funding environment and added to investors’ scepticism with early stage businesses which have not yet turned profits, or in some cases, yet generated income. The impact of these changes has hit a business world already battered by a cost-of-living crisis, shortage of labour, high fuel costs, the after effects of covid and the lockdowns, and geo-political uncertainty.”
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The majority of the insolvencies were company voluntary liquidations – liquidations started by a company’s shareholders – and are the highest reported figures since statistics were first collated in 1960.
“The increase in CVLs may reflect that many business have been ground down by a series of economic challenges which have hit in waves and eroded their businesses, leaving their owners with nothing to save – the pandemic, Brexit, labour shortages, the economic effects of the Ukraine conflict (leading to increased food and food costs) and now, rising interest rates,” Whiteson said.
“However, the increased costs of administrations, where additional regulation, aimed at protecting creditors by requiring more extensive reporting and consultation- may also have had the unintended consequence of putting these procedures beyond the reach of many businesses.”
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