The number of companies collapsing into insolvency in England and Wales has jumped by nearly 40% in a year, as soaring energy prices, high inflation and rising interest rates take their toll.
There were 1,948 company insolvencies in England and Wales last month, the Insolvency Service reported, up 16% from September’s total of 1,684.
That figure is 38% higher than in October 2021, when there were restrictions on winding up companies during the Covid pandemic, and 32% higher than in 2019.
It showed how companies in England and Wales were facing a “worsening situation”, said Jeremy Whiteson, a restructuring and insolvency partner at the City law firm Fladgate.
“It would be unsurprising if the situation was worsening for businesses and this was not merely a blip. High fuel prices, inflation, labour shortages, post-Brexit difficulties with international shipping, uncertainty in capital markets, raising interest rates and geopolitical uncertainty all pose difficulties for businesses,” he said.
“Anecdotal evidence suggests that there are a growing number of businesses in financial distress – although many are not yet reaching for formal insolvency procedures.”
Voluntary liquidations made up the bulk of the insolvencies – 1,594 – in which a company’s shareholders vote to wind a company up.
There were also 242 compulsory liquidations, where a court decides a company should be liquidated – more than four times as many as at the same time last year.
David Hudson, a restructuring partner at the business advisory firm FRP Advisory, said inflation was hurting firms badly. “On the ground inflation is devastating margins and throwing into doubt historically sound business models, which is eating away at confidence, undermining recovery plans and, crucially, testing the resolve of lenders,” he said.
“The latest insolvency figures show what many business leaders have been witnessing on the ground for some time now, conditions on the economic frontline are stormy. The chancellor faces an unenviable task on Thursday to steady the ship.”
Jeremy Hunt is expected to announce spending cuts and tax rises to plug a big hole in the government finances in the autumn statement on Thursday, along with a 40% windfall tax on electricity generators and a tougher 35% tax on oil and gas companies’ excess profits.
Two in five established businesses are concerned they could face insolvency or mass redundancies as the UK enters into a recession, according to a survey by Allica Bank.
Claire Burden, a partner at the professional services firm Evelyn Partners, said a survey of more than 500 small businesses owners by Censuswide showed that nearly a quarter had sold or remortgaged their home to raise funds for their company and a further 22% had invested personal savings.
