A record number of companies went bust in England and Wales last year, with over 25,000 insolvencies registered in 2023, the highest since 1993. Firms grappled with escalating costs and interest rates while energy bills skyrocketed and consumer spending hit an all-time low. One in 186 active firms became insolvent in 2023, the highest rate in three decades. Scotland and Northern Ireland, which have different bankruptcy laws to England and Wales, recorded their most significant numbers of company insolvencies since 2012 and 2019, respectively.
Julie Palmer, Begbies Traynor’s insolvency specialist, stated that the past year proved disastrous on the financial front for multiple businesses due to “interest rates at levels we haven’t seen in over a decade, pushing the cost of borrowing up, alongside inflation, weak consumer confidence and rising input costs.” Insolvency Service’s figures revealed that voluntary closures, through CVLs, increased by 9% from 2022 to 20,577, the highest since 1960. Companies forced to close rose by 44% to 2,827, more than twice the number of company liquidations in 2019.
Although last year’s firm insolvency rate hit a thirty-year high, it remained much below that of the 2008-2009 recession peak of 94.8 insolvencies per 10,000 active companies, thanks to the rising volume of registered firms in the UK. The hardest-hit sector in the retail industry was household name Wilko, whose collapse rendered over 12,000 staff jobless. From 2024, businesses would face obstacles when the national living wage increases, mainly affecting the hospitality and retail sectors, besides investor worries regarding persistent challenging external conditions, despite inflation subsiding.
Construction companies, already suffering at the hand of a plummeting housing market from higher interest rates, struggled further. Mazars, an auditing firm, disclosed that over 4,000 building firms were declared insolvent last year, a 7% increase from the previous year, against a backdrop of burgeoning labour and materials costs and borrowing costs. The construction industry faced more bankruptcies in the past three years than any other sector, according to Mazars
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