A new report has highlighted an increase in insolvencies among mid-sized UK SMEs over the past year and forecast that this trend could continue during 2023. The analysis, from alternative lender ThinCats, found that insolvency rates among mid-sized SMEs increased from 0.39 per cent in 2021 to 0.65 per cent last year.
What are mid-sized SMEs?
An SME is a business with a headcount of under 250 staff and turnover of under €50 million (approx. £43.8 million) or a balance sheet total of under €43 million (approx. £37.7 million). ThinCats defines mid-sized SMEs as those businesses with between 10 to 250 employees, between £1 million and £5 million in EBITDA and turnover of up to £20 million.
There are around 525,000 such businesses in the UK and, while they represent less than 5 per cent of private sector businesses, they are of huge importance to the UK economy, accounting for more than 25 per cent of private sector turnover.
What did 2022 bring for the UK’s mid-sized SMEs
As we’ve covered extensively elsewhere, 2022 proved hugely challenging for businesses of all sizes across the UK. Initial optimism at the outset of the year was quickly tempered by the start of Russia’s war in Ukraine.
The war greatly exacerbated existing supply chain issues that had festered in the wake of Brexit, drove spiralling cost inflation (which in turn fed into the cost-of-living crisis, pushing consumer spending down) and soaring energy costs.
These issues combined with the lingering effects of COVID-19, the debt piles that many had accrued during the pandemic and the end of COVID-related protections and support schemes to drive a huge increase in insolvencies last year. According to the Insolvency Service, UK insolvencies rose 57 per cent during 2022, with 22,109 company insolvencies representing the highest figure since 2009.
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