Corporate bankruptcies in England and Wales last month rose 40 per cent year-on-year to the highest level since monthly records began in January 2019.
Data from the Bankruptcy Service yesterday showed that 2,552 companies were declared bankrupt last month, overwhelmingly through voluntary liquidation of creditors, as company directors agreed to wind down without a formal court order.
However, the government agency said there was also a 34 percent increase in forced liquidations, in part due to more requests from tax authorities for refunds from companies unable to pay their tax bills.
Bankruptcies in the UK have been low during the pandemic due to an £80 billion commercial loan program and a temporary ban on court-ordered liquidations. The numbers have climbed since then, reaching a 13-year high in the last quarter of 2022 and staying close to that in the first quarter of 2023.
“Given that trading conditions remain very challenging, the number is likely to continue to rise during the second half of the year,” said David Kelly, head of insolvency at accountants firm PwC.
PricewaterhouseCoopers said the construction and retail sectors were hardest hit, and the number of food manufacturers in trouble was increasing. She added that about 99 per cent of the liquidation operations were characterized by companies with annual sales of less than one million pounds sterling.
There has been a wave of malaise in the construction industry, with 42 domestic and commercial construction service providers hiring administrators, according to data from Creditsafe.
Howard Russell Construction became one of the biggest casualties in the industry when it brought in consultants from FRP Advisory to deal with its bankruptcy. The Northumberland-based company has been a contractor on a number of projects in the North East with a turnover of more than £40m in the year to March 2022.
“The fallout from battling the effects of the pandemic, along with rising costs, increasing creditor pressure and rising inflation, is causing more companies to turn to the bankruptcy process to help resolve their financial issues,” said Nicky Fisher, president of R3, the trade restructuring body.
Lindsey Cooper, Restructuring Advisory Partner at RSM, said: “As interest rates continue to increase, it is becoming more and more difficult for some companies to refinance, and we expect more failures among those companies that are already in a cash-strapped position.
“Departments, which also allow for business restructuring, have also increased and we expect to see more management teams using these corporate rescue tools in the coming months.”
