Wed, 12 Oct 2022 | BUSINESS NEWS
The number of companies falling into administration increased 50 per cent in Q3 2022, as UK businesses were impacted by issues including rising inflation and supply chain disruption. Interpath Advisory, which revealed the findings from its analysis of notices in The Gazette, also warned that the pressure facing businesses has only increased since the end of Q3.
From July to September 2022, 265 UK companies filed for administration, compared to 176 during Q3 2021 and 243 in Q3 2020. While administrations are yet to reach pre-pandemic levels (with 401 administrations in Q3 2019), August saw the highest monthly total of administrations (105) since March 2020.
Interpath Advisory Chief Executive Blair Nimmo commented: “The summer months often herald a quieter period for corporate insolvencies, and so the fact that August witnessed the highest monthly total in more than two years is particularly telling.”
“We know that companies have been wrestling with a myriad of issues for some time, from rampant inflation, to supply chain challenges, to labour shortages, so this is perhaps the first real evidence that a significant shift in activity is now underway.”
A wide array of industries have been impacted by rising insolvencies, with an increase in administrations seen in sectors including construction, manufacturing, hospitality and retail. Many of these sectors are also especially vulnerable to the rising cost of energy, with Blair Nimmo warning that insolvencies could rise further as companies come under increasing pressure during Q4 and into 2023.
He commented: “The impact of rising interest rates, currency and gilt yield movements, and the increase in energy prices from 1 October are yet to feed through, but undoubtedly will only serve to compound the extraordinary pressure that businesses were already under.”
“We’re now in a situation where interest rates may well be above 5 per cent by Spring of next year, putting increased pressure on cashflows for businesses with high debt levels, and especially those with an unhedged position. Further, with suppliers trying to navigate the impact of a weaker Sterling, and consumers adjusting to rising mortgages and lower disposable income, businesses are going to be squeezed in all directions.”
“While the Government has intervened to provide certain relief in respect of rising energy costs and new loans for start-ups and small businesses, for many businesses, some difficult choices lie ahead.”
Mr. Nimmo added: “Speaking from our own experience at Interpath, we are certainly seeing a rise in activity and, based on our current pipeline, we would suggest that by the end of Q4 this year insolvency levels will have risen even further. Identifying cash pinch points and seeking advice early will be key for business over the coming weeks and months.”
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