In recent months, corporate insolvencies in England and Wales have spiked, reaching their highest levels since the 2009 global financial crisis. Data from the Insolvency Service paints a bleak picture of the economic challenges businesses are confronting, including high borrowing costs, reduced demand, and the termination of government COVID-19 support.

Key Insights

Between July and September, there were 6,208 registered company insolvencies, marking a 10% YoY increase and only a 2% decrease from the previous quarter. The termination of government support schemes, mounting post-pandemic debt, high inflation, and rising borrowing costs play significant roles in this trend.

Economic Impact

The surge in insolvencies has broader economic implications, potentially leading to reduced job opportunities and slower output growth, raising concerns about a looming recession.

Hardest-Hit Sectors

The accommodation and food service, wholesale and retail trade, and manufacturing sectors have been hit the hardest, grappling with weak demand and increasing operating costs.

Retail Sales Decline

High inflation and borrowing costs are evident in a 2.5% decline in retail sales in September compared to February 2020, reflecting the challenges retailers face as consumer spending tightens.

Looking Forward

The business landscape's future remains uncertain, with many sectors vulnerable to rising debt. The holiday season will be a critical moment. Still, challenges like high borrowing costs, limited access to working capital, weak consumer confidence, and high inflation may continue to drive corporate insolvencies in the coming year.

This surge in corporate insolvencies is a stark reminder of the economic challenges posed by the end of government support, mounting post-pandemic debt, inflation, and rising borrowing costs. The implications extend beyond individual businesses, impacting the broader economy. Businesses and policymakers must adapt for a more resilient and sustainable future.

Gavin Pickering, Head of Insolvency at stevensdrake, contributes to the conversation by saying, “It may seem like the Insolvency Practitioner is on their side at their meeting regarding winding up their business. Still, they are "officers of the court" with responsibilities to the company's creditors, and it will come down to how they have behaved as directors, whether or not the director is safe. Whilst prudent to wind their company up if it can't or is unlikely to be able to pay its debts as they go along, to best avoid possible personal liability, other things like their director's loan account, accounts records etc need to be in good order and up to date as it is often too late to fix after the company goes into liquidation.”

For professional guidance and support in the face of insolvency or financial difficulties, turn to the experienced insolvency team at stevensdrake. Our experts can help you navigate these challenging times and explore viable solutions.

Information gathered from Financial Times, see here.