How to keep your business afloat amid rising company insolvency rates

Conditions in the UK are tough for businesses, and for now they only seem to be getting tougher. Even successful businesses can become insolvent through changing conditions outside of their control.

A rise in corporate insolvency paints an alarming picture for businesses, and it’s important to understand why this is happening at an increasing rate.

Britain’s corporate insolvency rise

Corporate insolvencies aren’t anything new, but the number of businesses in England and Wales turning insolvent has hit a three-year high in 2023.

The latest monthly statistics provided by the Insolvency Service paint a damning picture of the UK market.

In March alone, corporate insolvencies rose to 2,457 from 1,784 in February. This represents a rise of 37.7 per cent in just a single month, with the vast majority of these instances (2,011) being cases of creditors’ voluntary liquidations.

In other words, directors are choosing to wind up their businesses rather than let them limp on until they arrive at that same fate anyway. While a difficult and undoubtedly painful decision for many to make, it can often be the stitch in time that saves nine.

However, given the impact on creditors and employees of a liquidated business, seeking a voluntary winding-up is not to be taken lightly, and is very much a final measure.

Why is this happening?

High rates of inflation and interest are combining to create an incredibly hostile environment for businesses. More than simply making supplies cost more, these factors impact many factors in a commercial operation and can create vicious circles in which one effect knocks on to another.

High inflation does mean that businesses pay more for the things they need—energy, supplies, and services, for instance—but it also means that they face pressure from staff to increase wages, so that their workers can stay on top of their own finances.

At the same time, the impacts of inflation on customers can mean reduced revenue as people cut back on spending and try to save their money. For businesses in the retail and hospitality sectors, this is especially treacherous.

Commonly, businesses facing problems with cash flow will turn to borrowing. However, when high inflation is coupled with rising interest rates, even that becomes harder, and may become impossible for some.

Additionally, not only do high rates of interest impact the ability to secure new funding, but they can also impact existing debts and make manageable loans into much bigger problems.

With both of these forces operating in tandem, it’s little surprise that we have seen such a corporate insolvency rise in the UK and that many businesses have been forced to close down voluntarily while they can.

Who can help with company insolvency?

If your business has become insolvent—or looks like it will become insolvent in the near future—then you need an insolvency practitioner to help.

Insolvency practitioners are experts in company insolvency who can give invaluable advice and guidance when needed most. Guided by a licensed insolvency practitioner, businesses and their directors can make wise decisions that help them manage insolvency as carefully as possible.

It may even be that a business is able to make a return to solvency with the right advice and strong leadership that can make the necessary decisions.

By taking advantage of an insolvency practitioner’s help, businesses can often avoid becoming another statistic in the monthly insolvency reports.

If liquidation is the only option left for a business, only a licensed insolvency practitioner can take care of the process. Liquidation will see the business’s assets sold off to cover as much debt as possible before it ceases to trade.

Keeping afloat with Irwin Insolvency

When costs are too high and insolvency is looming, don’t give up just yet.

Irwin Insolvency is dedicated to helping businesses avoid the red and work their way back to profitability. Our success stories have saved companies from going under during unfriendly market conditions, and we can help businesses like yours.

It starts by reaching out and introducing yourself to our friendly, down-to-earth team. To find out more about our services, contact us today for a conversation.

Contact Irwin Insolvency today for your free consultation

Call us
0800 254 5122

About the author

Gerald Irwin

Gerald Irwin is founder and director of Sutton Coldfield-based licensed insolvency practitioners and business advisers, Irwin Insolvency. He specialises in corporate recovery, insolvency,
 rescue and turnaround.