Insolvencies at highest level since aftermath of financial crisis
Wed, 01 Feb 2023 | BUSINESS NEWS
New figures from the UK’s Insolvency Service have revealed that UK company insolvencies reached their highest level since the aftermath of the financial crisis last year. During 2022, 22,109 UK companies entered insolvency, a 57 per cent increase from 2021 and the highest figure since 2009.
The steep increase in insolvencies comes following the end of COVID-19 support packages, which enabled many businesses to survive the impact of the pandemic, as well as more recent headwinds such as rising inflation, interest rate increases and a decline in consumer confidence.
Creditors Voluntary Liquidations were the main driving force behind the increase, rising to 18,821 last year, the highest since records began in 1960. Administrations, meanwhile, rose 54.6 per cent to 1,231 during 2022.
The rate of company liquidations per 10,000 businesses rose from 32.9 in 2021 to 49.5 per cent last year. This was the highest rate since 2015, but was still around half the levels seen in 2009 following the financial crisis.
The worst affected industries were construction, retail, accommodation and foodservice, with these sectors facing a raft of problems including waning consumer demand, rising costs for raw materials, staff shortages and supply chain disruption.
PwC Director of Restructuring and Forensics Catherine Atkinson called the figures “a stark reflection of the challenges businesses have been and will continue to face in the first quarter of 2023.”
Atkinson added: "Financial headwinds caused by trading costs, rent, interest rates and utility bills alongside other operational pressures are causing increasing amounts of drag on companies weathering working capital pressures as they wait for payments to come in for goods and services”.
There have also been warnings that worse could yet be to come for UK companies, with headwinds set to continue and the UK government due to scale back its energy support package for businesses from April.
Samantha Keen, President of the Insolvency Practitioners Association (IPA) and UK Turnaround and Restructuring Strategy Partner at EY-Parthenon said: “Supply-chain pressures, rising inflation and high energy prices have created a ‘trilemma’ of headwinds which many management teams will be experiencing simultaneously for the first time.”
“This stress is now deepening and spreading to all sectors of the economy as falling confidence affects investment decisions, contract renewals and access to credit.”
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