Corporate bankruptcies reached a 30-year high last year as businesses struggled with high interest rates, increasing cost pressures and weak consumer confidence.
A total of 25,158 companies will go bankrupt across England and Wales in 2023, an increase of 14% on 2022 and the highest annual number since 1993, the Insolvency Service announced on Tuesday.
The number of voluntary liquidations (CVLs) increased by 9% to 20,577, the highest since records began in 1960.
In terms of the ratio, 53.7 out of every 10,000 active companies will go bankrupt in 2023, up from 49.6 in 2022. However, this figure is still far lower than the 94.8 bankruptcy rate at its peak during the credit crunch in 2008.
The grim numbers show that businesses have faced consecutive economic pressures over the past year, including rising interest rates and soaring energy and employee wages, while also grappling with declining consumer confidence. .
Experts have warned that high levels of insolvency mean the UK’s trading environment remains “quite difficult” and businesses face what could be a “perfect storm of financial distress”. .
Labor said it was further evidence of the Tories’ “economic failure”, while the Liberal Democrats said British businesses had “failed” under the watch of Rishi Sunak and Jeremy Hunt. .
Shadow Enterprise Secretary Jonathan Reynolds said it was further evidence of “14 years of Tory economic failure”.
He added: ‘The Conservative Party has flattened UK growth, imposed high taxes and now British businesses are closing their doors permanently at record levels.
“It’s time for change. Labor has plans to support British businesses, reform business rates, lower energy bills and restore Britain’s great high streets.”
Liberal Democrat Treasury spokeswoman Sarah Olney said British businesses had “failed” and communities “lost vital shops and services” under Rishi Sunak and Jeremy Hunt’s watch. Stated.
The data also showed that the number of bankruptcies in the last three months of last year rose 14% year-on-year to 6,788, the highest level since the end of 2008. This was an increase of 9% over the previous quarter.
Julie Palmer, partner at Begbies Traynor, said: “This is the worst figure in over 30 years and shows how difficult the situation has been for many businesses. In addition to this, our latest Red Flag Alert report shows that 47,000 UK businesses started 2024 on the brink of collapse, with all of them flagging further problems this year.
“The combination of interest rates at levels not seen in more than a decade is forcing thousands of companies into bankruptcy, with inflation, weak consumer confidence and rising input costs coupled with rising borrowing costs. “It’s a perfect storm for the economy.”
“Having said that, a better-than-expected Christmas may postpone concerns for some businesses, and today’s drop in over-the-counter price inflation means interest rates could start to fall. Combined with the signal from the Bank of England that this is the case, it is already providing some reassurance to business leaders who are worried about their future.
“Economic conditions need to improve rapidly, as more companies will go bankrupt in 2023 than during the financial crisis. ‘s fight for survival may go too far.”
Last year, the three industries with the highest levels of bankruptcies were construction, wholesale/retail, and lodging/food services.
Mark Ford, a restructuring expert at professional services firm Evelyn Partners, said: “While the general feeling may be that the worst is over in terms of interest rates and prices, the trading environment for UK companies is It’s still pretty tough.
“The cost environment for some companies is expected to become more challenging, particularly in the construction, retail, leisure and healthcare sectors.
“It also appears that the crisis in the Middle East could begin to choke supply chains, extending lead times and limiting the supply of imported materials and components.”
Jeremy Whiteson, restructuring and insolvency partner at Fladgate Law Firm, added that this was an “alarming situation”.
He said: “Many businesses are facing wear and tear from a series of financial shocks, including the pandemic; Brexit, shortages and soaring prices of labor, electricity and many goods; foreign conflicts; high interest rates; and anemic growth as consumers This is sure to be a huge blow to British businesses.”
The figures come just days before the Bank of England is expected to keep interest rates on hold at 5.25%, putting pressure on policymakers to start cutting rates later this year.