According to recent government figures, England and Wales experienced the highest number of company insolvencies since 2009 in the second quarter of this year. During this three-month

period, 6,342 companies were registered as insolvent on a seasonally adjusted basis, marking a 13% increase compared to the previous year.

The surge in insolvencies comes after a period of decline during the COVID-19 pandemic, as businesses benefited from substantial government-backed loans totaling £80 billion ($102 billion) and a temporary ban on court-ordered liquidations. However, as these support measures waned and the ban on liquidations ended in April 2022, many small businesses faced challenges in repaying the loans. Moreover, the situation was exacerbated by the impact of the Bank of England's interest rate hikes, which reached 5% in June, the highest rate in 15 years. Additionally, rising energy bills and staffing costs added further strain.

Matthew Ingram, a managing director at risk advisory firm Kroll, pointed out that the increased insolvency numbers were not surprising, given the difficult macroeconomic environment and the fact that many businesses were already overleveraged after navigating the pandemic.

Creditors' voluntary liquidations, where company directors agree to wind up operations without a formal court order, reached a record high of 5,240, making it the most common form of insolvency. Meanwhile, the number of compulsory liquidations stood at 637, still below pre-pandemic levels.

The Bank of England expressed its expectation that the corporate sector in Britain would remain "broadly resilient" in the face of higher interest rates and sluggish growth, with most challenges being concentrated among smaller firms with relatively low debt. However, David Kelly, head of insolvency at PwC, predicted that a growing number of larger companies would face insolvency this year, likening it to homeowners facing the impact of higher interest rates when coming off fixed mortgage rates.

Since the beginning of 2023, a total of 157 businesses with annual revenues exceeding £10 million have been declared insolvent. The sectors hit hardest by insolvency were construction, wholesale and retail, and hospitality, partly due to the larger number of businesses operating in these industries.

In Scotland, which operates under different insolvency laws from England and Wales, company insolvencies were 25% higher compared to the previous year. Photo by Trollbackco, Wikimedia commons.