RSM UK, the audit, tax and consulting adviser, reports an increase in company insolvencies, particularly in the retail, leisure and hospitality sectors, according to the latest data from the Insolvency Service.

These consumer-facing businesses have seen a rise in insolvency rates during the past year ending in Q3 2023, with wholesale and retail witnessing a notable increase of 52 per cent during that time.

Robyn Duffy, a senior analyst for consumer markets at RSM UK, explains, “The past year has presented the retail, leisure, and hospitality industries with one of their most challenging trading environments.”

High inflation had two effects: it reduced post-lockdown demand and increased input costs for raw materials and utilities, among other corporate expenses. Due to labour shortages, many businesses have also had to raise wages significantly in order to remain competitive and draw in talent. Consequently, throughout the past year, there has been a significant rise in insolvencies, added Robyn.

Many retailers have made a concerted effort to cut back on excess inventory throughout 2023, which has relieved some of the strain on balance sheets. This gives these companies a better outlook, especially when combined with falling input costs.