The number of businesses going bust in England and Wales last year reached a record high since 1993 amid inflationary and interest rate pressures.
Data released by the Insolvency Service on Jan. 30 showed that 2023 was a tough year for companies to stay afloat.
More than 25,000 company insolvencies were registered in 2023, with the last quarter of the year seeing the highest number of insolvencies since the 2008 financial crisis and the start of records in 1960.
Among the high-profile casualties was the high street retail chain Wilko that went into administration in August 2023, putting put 12,500 jobs at risk.
The most common company insolvency procedure last year was creditors’ voluntary liquidations (CVLs), accounting for 82 percent of cases. Other reasons for companies going bust included compulsory liquidations (11 percent), administrations (6 percent), and company voluntary arrangements (1 percent).
Creditors reported that during the COVID-19 pandemic, despite lockdown restrictions, the number of CVLs was lower than in the post-pandemic years. This was attributed to the positive impact of government support measures for businesses that were in place during the pandemic.
In the post-pandemic years, businesses struggled with climbing inflation, interest rates, and the ongoing cost-of-living crisis.
“The economy struggled for momentum at the end of last year as weakened customer demand, an onerous tax burden, and high interest rates drove a notable deterioration across key indicators of business activity,” Suren Thiru, economies director at the Institute of Chartered Accountants in England and Wales (ICAEW), said in a statement.
The construction sector experienced the highest number of insolvencies in 2023, capturing 18 percent. This was followed by wholesale and retail trade, as well as accommodation and food service activities.
The analysis pointed out that all industries except electricity, gas, steam, and air conditioning supply saw either increased insolvency numbers or only single figure decreases in 2023 compared to 2022.
Researchers also noted that while the number of companies going bust last year was at a 30-year peak, there was also an increase in the number of new businesses registering with Companies House. This means that the rate of insolvencies, compared with active companies, remained much lower than during the 2008–2009 recession.
Commenting on the results of the last quarter of 2024, the Federation of Small Businesses (FSB) reported a drop in confidence. Small businesses were impacted by the cost of utilities, labour and tax, the FSB said.
Predictions
Looking ahead, ICAEW reported encouraging estimates for businesses in the next 12 months. This includes faster domestic and export sales growth, as well as profits growth.Mr. Thiru said that these indicators suggest “that even if the UK did suffer a small technical recession at the end of last year, the return to growth would be pretty quick.”
A year-on-year slowdown in selling prices growth has provided reassurance that “inflation will drop back at a decent pace this year, despite December’s unexpected increase,” according to ICAEW.
The FSB said that loss of confidence by small businesses “should be a wake-up call to the government and to decision-makers.”
The organisation warned that “turning around the mood among many small businesses is going to require strong measures to promote growth in the Spring Budget.”
Chancellor Jeremy Hunt is set to deliver the Spring Budget on March 6.
