Company insolvencies poised for a record high in the UK

This should be similar to previous pieces, for example like the one about how insolvency practitioners can assist tech compnies following the collapse of Silicon Valley Bank.

The latest angle is a prediction that insolvencies are on course to reach a record high in 2023 due to inflation and rising interest rates impacting company balance sheets.For many businesses in the UK, the threat of insolvency is far from over.

As the economy continues to struggle with the double threat of rising interest rates and high inflation, the number of business insolvencies in 2023 will reach a record high.

Company insolvencies poised for record high

When money becomes tight for businesses, one of the most simple and straightforward solutions is short-term finance. Borrowing money in a relatively small amount can cover gaps in capital and be repaid shortly thereafter.

However, when interest rates rise to curb the amount of borrowing that companies can access, this can cut off small or medium-sized enterprises (SMEs) from this source of financial security.

In the current economic climate, high inflation continues to weaken the pound all the while.

These factors impact every facet of business, from payroll to purchasing supplies.

It comes as no surprise that Q1 of 2023 (January–March) saw 5,747 company insolvencies across England and Wales. This total is 18 per cent higher than the same period in 2022.

Of these, the vast majority were voluntary, with 82 per cent of cases being creditors’ voluntary liquidations (CVLs).

That is followed by 11 per cent of cases being compulsory liquidations, six per cent as administrations, and just one per cent being company voluntary arrangements (CVAs).

With around eight times as many CVLs as compulsory liquidations in Q1, it’s clear that the vast majority of businesses are not blindsided by the relentless challenges presented by the economy.

Rather, directors are taking the opportunity of the last choices remaining to them before creditor pressure leads to winding up action.

It should be noted that while compulsory liquidations were 11 per cent lower than the previous quarter—which might at first suggest an improvement—they were almost twice as high (at 92 per cent) as in Q1 of 2022.

Insolvencies in Q1 2023 and Q4 2022 were the highest seen since Q3 2009.

Such a sharp increase paints a stark image of the struggles that business will continue to face through 2023.

The rate of rising insolvencies is important, for if it continues, 2023’s remaining quarters will see even higher numbers.

What does Irwin Insolvency think?

It’s an unfortunate truth that continuing into 2023, many businesses will find their financial situation worsening.

Business leaders will need to make some difficult choices, but it’s important to remember that there are always options as long as directors are reaching out for help.

Certain voluntary arrangements and processes can be accessed with the help of experienced insolvency practitioners, which can avert disaster in the long-term and correct the course of a business while there’s still time.

Quite often, debts can be resolved with the right strategy and decisive leadership.

For businesses feeling the pressure of operating in such a challenging environment, it’s imperative that help is sought at the earliest possibility.

To learn more about your options when insolvency looms, contact Irwin Insolvency today.

Contact Irwin Insolvency today for your free consultation

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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.