An insolvency practitioner of one of the UK’s leading accountancy firms predicts the number of company insolvencies in England and Wales will set new records during 2023.
The warning comes as latest quarterly insolvency statistics for January to March 2023 (Q1) reveal there were 5,747 company insolvencies in England and Wales, 18% higher than in Q1 2022.
Notably, there were 4,739 creditors’ voluntary liquidations (CVLs), close to the highest quarterly level since records began in 1960. There were 652 compulsory liquidations, 318 administrations, and 38 company voluntary arrangements (CVAs).
Nicola Banham, R&I Director at UK Top 10 accountancy firm Azets, says that as long as inflation remains high and interest rates continue to rise as expected, cash will become tight for many more businesses due to increased finance costs and increased costs of supplies.
She said: “Government financial support during the pandemic led to a significant reduction in corporate insolvencies. Last year, insolvencies reached the highest level since 2009. If this continues to increase at the same rate as seen in Q1 2023, corporate insolvencies will be even higher during 2023.
“Business are continuing to operate in a challenging environment as inflation remains high and interest rates continue to rise. As a result, cash will become tight for many more businesses due to increased finance costs and increased costs of supplies.
“Furthermore, the Energy Bill Relief Scheme ended in March, so businesses will face a further increase in energy costs and we expect to see far more casualties in certain sectors. Most at risk are those with significant energy consumption, including retail, hospitality, hotels, restaurants, and manufacturing.
“Directors must seek advice early if they are concerned about cash and ongoing trading, to preserve as much of the business as possible and avoid liquidation.”
