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The number of firms going bust in the first three months of 2023 came dangerously close to a 13-year high.
The pandemic, inflation and rising borrowing costs have all combined to wreak havoc on businesses in England and Wales.
The result has been 5,747 registered company insolvencies, 18 per cent higher than the same period last year and close to the 5,969 insolvencies recorded in the final quarter of 2022, which was the highest number since mid-2009.
The number of creditors’ voluntary liquidations (CVLs) also remained close to the highest quarterly level on Insolvency Service records that go back to the 1960s. Compulsory liquidations also increased.
A downturn in housing has seen construction firms hit hard, representing 18 per cent of all insolvencies in March 2023, with 405 building companies becoming insolvent.
Insolvency experts said companies are struggling to secure financing and pay off loans due to inflation and high interest rates, at a time when many customers are restraining their spending because of the difficult broader economic outlook.
Latest figures from Scotland show a similar picture with the number of firms becoming insolvent has reached an 11-year high.
Corporate insolvencies rose to 1,132 in 2022-23, with this up by almost a third (32.6 per cent) on the previous year. The 2022-23 total is nearly a fifth (19.4 per cent) higher than pre-pandemic, with 948 insolvencies recorded in 2019-20.
Samantha Keen, president of the Insolvency Practitioners Association, said: “The significant year-on-year rise in corporate insolvencies has again been driven by creditors’ voluntary liquidations, rather than looking at rescue options.”
The number of individuals taking “breathing space” from their debt problems also rose by more than a third year-on-year, the service said. The scheme protects people from their creditors for 60 days, with most interest and penalty charges frozen and enforcement action halted.
The sharp rise in breathing space orders, 409 of which were for mental health reasons, may explain why the number of people going financially insolvent was 2 per cent lower in the first quarter of this year than in the final quarter of 2022.
The 29,017 personal insolvencies registered over the latest three-month period were also 9 per cent lower than the same quarter the previous year. Individual voluntary arrangements (IVAs) – debt agreements with creditors to pay all or part of amounts owed, made up 70 per cent, while debt relief orders made up 24 per cent and bankruptcies six per cent.
Nicky Fisher, president of insolvency trade body R3, said: “Money worries are front of mind with the price of energy and food, and the current and future health of the economy, continuing to cause concern.”
“We’ve also seen household borrowing increase and an increase in people turning to credit to pay their bills. It’s understandable that people are choosing to go down this route but it isn’t a sustainable one.”
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