Number of insolvent UK firms hits new record

Number of insolvent UK firms hits new record

The number of companies reporting insolvency may surge higher than last year, experts in the UK warn, noting that this figure is already higher than during the 2009 recession, following the financial crisis.

ECONOMY FEBRUARY 2. 2023 06:40

Businesses in the UK have been hit the hardest in the last 14 years, with nearly a total of twenty thousand firms falling into insolvency in England and Wales in 2022. In other words, they are on the brink of bankruptcy and their number surged to the highest level since 2009, according to government figures.

After two years of government support that suppressed numbers, “2022 was the year the insolvency dam burst,” said Christina Fitzgerald, head of a professional organisation.

Many companies are for the first time experiencing a “trilemma” of supply chain pressures, inflation and high energy prices, another expert, Samantha Keen, said, adding that this is an impossible situation where these three factors need to be wrestled with simultaneously.

“This stress is now deepening and spreading to all sectors of the economy as falling confidence affects investment decisions, contract renewals and access to credit,”

the expert said. Figures show that the number of companies opting for voluntary liquidations is the highest since records began in 1960.

The combined figure for insolvencies reached nearly six thousand in the final quarter of 2022, when many directors no longer saw a way to sustain their businesses in the face of soaring inflation, rising credit costs and the accelerating cost-of-living crisis. It is also worth noting that in most industries, a higher number of companies have become insolvent than in 2021, highlighting the multitude of challenges facing businesses.

According to experts, although smaller businesses, which usually have fewer resources, are much more exposed to the crisis, in the last quarter of 2022, more and more medium-sized and larger companies also appeared on the list of companies reporting insolvency.

Amid tax hikes, rising prices and weak growth prospects, businesses are the most pessimistic about the economy since the depths of the Great Recession, according to a survey. The Institute of Chartered Accountants in England and Wales (ICAEW) says companies in the UK are facing chronic staff shortages, while many are finding it increasingly difficult to borrow. And among those who took out a discount loan during the coronavirus epidemic, many are now unable to repay the debt properly.

Due to the problems, business confidence is at its lowest level since 2009, and construction companies, retailers and manufacturers are the most severely affected, the accountancy organization said.

Suren Thiru, chief economic officer of the ICAEW, said that the combination of a six percentage point rise in corporation tax and less government energy subsidies means that many companies are facing a “cliff edge,” as consumers tighten their belts and the economy slows, causing their revenues to drop.

“Businesses are starting 2023 at a very weak point financially,”

he added, noting that the government has not addressed long-standing issues and problems related to investment and productivity that would help the economy grow again.

A separate report warned that slow and unpredictable decisions by regulators were hurting Britain’s competitiveness on the global stage.




economy, Great Britain, inflation, uk