The end of Covid support has put an additional burden on companies now facing crippling interest rates and energy prices.
Experts warned that the number of insolvencies has increased after the highest number of companies failed last year. In 2022, a total of 22,109 companies became insolvent in England and Wales. This was the highest number since 2009. Interest rates, energy prices, and pandemic loans are pulling the rug from under thousands of firms.
Christina Fitzgerald, President of R3, a trade body for insolvency and restructuring professionals, said that after two years of government support suppressing the numbers, “2022 was the year the insolvency dam burst”.
According to Samantha Keen of EY-Parthenon and President of the Insolvency Practitioners Association, many businesses are experiencing a "trilemma" of supply chain pressures, inflation, and high energy prices. She said: “This stress is now deepening and spreading to all sectors of the economy as falling confidence affects investment decisions, contract renewals and access to credit.” The figures demonstrate that the number of firms opting to wind up voluntarily reached its highest level since records began in 1960.
David Kelly, Head of Insolvency in PWC's Restructuring & Forensics practice, commented: “It’s a clear sign that many directors are taking the difficult step to accept they have reached the end of the road.” The number of insolvencies reached a record high in the final three months of the year at 5,938, as inflation, rising borrowing costs and the cost of living crisis intensified.
Directors have difficult choices to make. Hoping for company growth to pay increased costs may never happen or be some way off. Directors can only hold on for so long before they may become personally liable to meet a company’s debts and if in any doubt should seek advice on their and the company position without delay.
The stevensdrake Corporate Recovery and Insolvency Department is run by Specialist Insolvency Lawyer, Gavin Pickering. stevensdrake strives to provide clients with practical, helpful advice, so please get in touch if you need any support with insolvency.