Company insolvencies poised for record high

Company insolvencies are set to reach record highs during 2023 as inflation and rising interest rates hit balance sheets across the UK, it is claimed.

Nicola Banham, restructuring and insolvency director at UK top 10 accountancy firm Azets, predicts the number of company insolvencies in England and Wales will set new records this year.

The warning comes as latest quarterly insolvency statistics for January to March 2023 (Q1) reveal there were 5,747 company insolvencies in England and Wales, 18 per cent higher than in Q1 2022.

There were 4,739 creditors ' voluntary liquidations (CVLs), close to the highest quarterly level since records began in 1960. There were 652 compulsory liquidations, 318 administrations, and 38 company voluntary arrangements (CVAs).

Nicola Banham of Azets says that cash will become tight this year for many more businesses due to greater finance costs and increased costs of supplies.

She said: “Government financial support during the pandemic led to a significant reduction in corporate insolvencies. Last year, insolvencies reached the highest level since 2009. If this continues to increase at the same rate as seen in Q1 2023, corporate insolvencies will be even higher during 2023.

“Businesses are continuing to operate in a challenging environment as inflation remains high and interest rates continue to rise.

“Furthermore, the Energy Bill Relief Scheme ended in March, so businesses will face a further increase in energy costs and we expect to see far more casualties in certain sectors. Most at risk are those with significant energy consumption, including retail, hospitality, hotels, restaurants, and manufacturing.

“Directors must seek advice early if they are concerned about cash and ongoing trading to preserve as much of the business as possible and avoid liquidation. ”