Companies going bankrupt on track for worst year since 2009
As reported by BBC News today, the number of firms going bust this year is on track to be the highest since the worst financial crisis in modern time in 2009.
In figures released by the Government today, in England and Wales, insolvencies grew by 10% from a year ago in the 3 months to end of September 2023.
There has also been insolvency a sharp rise in the number of firms at risk of going bust. Defined as companies that are in “critical financial distress”, the figure jumped by 25% in the last three months, according to expert Begbies Traynor.
These companies have a county court judgement of more than £5,000, which is often a precursor to becoming insolvent.
There are nearly 38,000 companies in critical financial distress, according to data prepared by analysts Red Flag for Begbies Traynor. Julie Palmer, from Begbies Traynor, said this was down to a combination of higher inflation and borrowing costs twinned with weaker consumer confidence and demand.
“Tens of thousands of British companies are in financial dire straits now that the era of cheap money is firmly behind us,” she said.
“Businesses that had loaded up on debt at rock-bottom rates, and were only able to cling on during the pandemic thanks to government support, must now deal with a financial reality check as higher interest rates hit working capital for the foreseeable future.
“Taken together with stubbornly high inflation and weak consumer confidence, many of these businesses will inevitably head towards failure.”
Support measures during Covid – including furlough, bounce back loans and forbearance on the part of HMRC – kept company failure rates low but those supports have fallen away at the same time as inflation, driven in main by the energy price crisis, and interest rates have risen hitting company bottom lines and their customers pockets.
As the energy market remains very high, it has never been more important to keep an eye on the market to make sure you are paying the best possible price.
Click here to see the latest business electricity prices or business gas prices for your business.