The number of companies declared insolvent in England and Wales last month has seen a notable increase of 17% compared to the previous year, according to the Insolvency Service, a government agency. However, insolvencies in the third quarter are expected to be slightly lower than the second quarter’s 14-year high.
Non-seasonally adjusted data revealed that 1,967 companies were registered insolvent, a rise from 1,688 in the same period last year. On a non-seasonally adjusted basis, a total of 6,011 companies were declared insolvent in the three months leading up to the end of September. This figure is down from the seasonally adjusted total of 6,342 in the second quarter, which marked the highest number of insolvencies since 2009. Seasonally adjusted data for the third quarter will be published on October 31.
The economic strain resulting from increased interest rates and the sharp rise in the cost of energy and essential goods, such as food, has placed significant pressure on both businesses and households. The Bank of England noted that while businesses were expected to be “broadly resilient” to higher interest rates and weak growth, there would likely be an increase in the number of households and firms burdened by high debt costs.
David Hudson, a partner at restructuring advisors FRP, expressed concerns over the persistently high levels of insolvencies across the economy, stating that without a rapid and substantial improvement in economic conditions, this trend is likely to continue throughout the winter and into the following year.
The Insolvency Service attributed the increase in insolvencies to creditors’ voluntary liquidations, where a business’s directors and creditors agree to wind it up. Court-ordered insolvencies, which account for a smaller portion of the total, have now returned to similar levels seen in 2019 after experiencing a decline during the COVID-19 pandemic due to legal barriers preventing the forcible winding up of companies.
In contrast to the rise in company insolvencies, individual insolvencies in September in England and Wales decreased by 27% compared to the previous year and were also lower than the levels recorded in 2019.
These developments highlight the ongoing challenges faced by businesses and households in the current economic climate, while also underscoring the need for improved conditions and support to mitigate further insolvencies. As the impact of rising interest rates and the soaring costs of essential goods continues, it remains crucial for policies and measures to be implemented to alleviate these pressures and promote economic stability.
[Reporting by David Milliken; Editing by William Schomberg and Sachin Ravikumar]
More detail via Daily Mail Online here… ( Image via Daily Mail Online )