[co-author: Lucy Dickinson Green]
Quarterly UK insolvency statistics (covering April to June 2022 inclusive) were released on 2 August 2022. They show that there has been an 81% increase in business insolvencies in England and in Wales compared to the same quarter in 2021, with the total number of corporate bankruptcies in Q2 being the highest since Q3 2009. Significantly, creditors’ voluntary liquidations climbed to 4,908, the highest number high since records began in 1960. The number of insolvencies is expected to remain high for some time to come, given the difficult economic environment. climate. This quarter saw a 13% increase in failures compared to the first quarter of this year.
The support measures offered by the government during the pandemic have reduced the number of business bankruptcies. Not surprisingly, as these measures have been removed or reduced, business insolvency is on the rise. However, that’s not all. One of the main factors pushing the stats up is the cash flow woes businesses are facing due to a combination of the removal of COVID-related fiscal support measures, rising fuel costs and the energy, the war in Ukraine and high inflation. Consumer confidence and demand are eroding and some businesses are struggling to find staff and basic materials. This combination of significant cost increases and weakening demand is causing overall economic activity to decline. Some businesses are also struggling with COVID-related debts that they are unable to repay. As inflation becomes the worst it has been since 1970, an ever-increasing number of businesses are simply unable to continue operating.
The construction industry, retail, food producers and manufacturers with high energy costs are among the hardest hit sectors recently due to their sensitivity to supply chain fluctuations and rising energy costs. The current market consensus is that insolvencies may continue to rise in this difficult economic climate over the next few months before we start to see improved business performance and the insolvency rate begins to decline.
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