Fri, 28 Jul 2023 | BUSINESS NEWS
Insolvencies in England and Wales hit their highest level since the financial crisis in the second quarter of this year, according to official figures, as companies were impacted by factors including rising interest rates, high inflation, cost increases and the end of COVID-era financial support measures.
According to figures from the UK’s government’s Insolvency Service, there were 6,342 company insolvencies in England and Wales in the three months to the end of June 2023. This represented a 13 per cent increase from the second quarter of 2022 and was the highest quarterly figure seen since Q2 2009, when the UK was suffering from the fallout of the financial crisis.
The Insolvency Service said that the increase in insolvencies was led by rising creditors’ voluntary liquidations, with 5,240 companies being dissolved by their owners during the quarter. Meanwhile, there were 509 administrations, 637 compulsory liquidations and 56 company voluntary arrangements (CVAs).
The new data means that over 12,000 companies in England and Wales entered insolvency during the first half of the year, with companies coming under severe pressure from rising energy bills, soaring borrowing costs amid rising interest rates and higher costs for labour.
With interest rates continuing to rise, PwC’s Head of Insolvency David Kelly warned that the worst may yet be to come. He commented: "High inflation and the increasing cost base for firms is resulting in the erosion of both liquidity and shareholder value, thus reducing confidence in the ability to hit future forecasts."
"Coupled with rising interest rates, it is making for a very challenging environment for business. Like homeowners coming off fixed mortgage rates, many businesses have yet to refinance their debt, meaning the full impact of higher interest rates may yet to be felt."
Rising interest rates have been forecast to have wiped out all of the UK's "zombie companies" by the end of 2024.
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