Difficult economic conditions led to an 18 percent increase in corporate bankruptcies during April, as rising debt levels, rising interest rates and spending cuts took their toll.
According to data from Companies House, corporate bankruptcies rose to 2,177 in April, compared to 1,838 in March. Over the 12 months to the end of April, the insolvency rate rose to 57 per 10,000 companies, compared to 52.6 per 10,000 the previous year.
The current level of insolvencies remains much higher than during the pandemic and 2014-2019. However, it is still below the peak of 113.1 bankruptcies per 10,000 businesses during the 2008-2009 recession.
The construction sector was particularly affected, with 4,273 bankruptcies reported in the 12 months to the end of March. This sector was responsible for about 17 percent of all insolvencies, as companies struggled with inflation and high labor costs.
Kelly Borman, national head of construction at RSM UK, noted that many construction companies are “still recovering from legacy contracts, which were bought as fixed-cost contracts pre-Covid and are subject to litigation”.
Forced liquidations in April rose to 300, the highest level since January 2019, reflecting the ongoing struggle with rising debt levels.
Amid this rise in insolvencies, FRP Restructuring Advisory Group has announced useful results. The London-based company expects its annual profits to rise to £37 million, with expected revenues of £128 million for the year to April, representing a 23 per cent increase on the previous year.
FRP Advisory has been involved in high-profile restructuring cases, including The Body Shop, Inland Homes and the parent company of Reader's Digest. The company expanded its market share to 16 per cent from 14 per cent in 2023, and handled 76 deals worth a total of £1.4 billion over the year, down from £1.8 billion the previous year.
As the economic landscape continues to face challenges, the rise in corporate bankruptcies underscores the urgent need for businesses to adapt and seek expert advice to navigate these turbulent times.
