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Business Insolvencies Rise As Government Aid Wanes

Business Insolvencies Rise As Government Aid Wanes

Company insolvencies in September totaled 1,446, increasing from 1,349 in August and 56% higher than the same month last year, data from the Insolvency Service shows. September saw many firms contend with rising energy and labor costs and the tapering of Covid government support. Some insolvency experts fear the number will rise further. Energy companies Utility Point and PfP Energy, musical instrument maker Roli, as well as chilled food delivery firm EVCL Chill all, collapsed last month.

More to go bust?

Claire Burden, a partner at professional services firm Tilney Smith & Williamson, said the ongoing energy price rises will “reverberate into additional sectors” and push more companies such as those in manufacturing and consumer goods into financial strife. “This will cause further failures when combined with existing pressures of increased transport costs and supply issues,” Ms. Burden added. The Bank of England earlier this month said one-third of small businesses in the UK are classed as “highly indebted”, where their debt levels are more than 10 times their cash balances. Matt Richards, a restructuring and insolvencies partner at accountants Azets, said he expected the upward trend of insolvencies to continue “now that the government has withdrawn most of its corporate support measures”.

“The additional pressures facing businesses today with higher inflation, staff shortages, increasing energy prices and the need to repay Covid-incurred debt, is likely to increase the number of insolvencies over the next 12 months.” An HM Treasury spokesperson said the government had backed UK businesses with £400bn of support, including through the Plan for Jobs scheme. “It’s working – two million fewer people are now expected to be out of work than previously feared and the number of redundancies remains near a seven-year low,” they said. “We’re also unlocking investment through the £20bn a year super deduction, the biggest two-year business tax cut in modern British history, while £650bn of private and public infrastructure investment will support 425,000 jobs over the next four years.”

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