Insolvencies driven up by rocketing costs
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Company insolvencies rose last month as businesses grappled with higher inflation and more winding-up petitions from HM Revenue & Customs.
The Insolvency Service said there had been 1,671 corporate insolvencies in England and Wales in January, 7 per cent higher than a year ago and 11 per cent above pre-pandemic levels in 2020.
The increase was driven by creditors’ voluntary liquidations, up by 2 per cent on the month to 1,382 and 37 per cent higher than in January 2020.
A total of 189 compulsory liquidations were recorded in January, a rise of 52 per cent year-on-year, as a result of increased winding-up petitions from HMRC. The tax authority was barred from issuing winding-up petitions during the pandemic as businesses were forced to shut down by the government. However, these restrictions were removed on April 1 last year, leading to an increase in activity against companies.
“It’s been an unhappy new year for businesses in England and Wales,” Christina Fitzgerald, president of R3, the insolvency and restructuring trade body, said. “The cost of living crisis and economic issues have meant the traditional new year spike in sales hasn’t happened and we’ve seen a number of household names enter an insolvency process over the past month in an attempt to resolve their financial issues.”
Paperchase became the first retailer to collapse into administration this year. Its brand and IP address were acquired by Tesco, but Begbies Traynor, the administrator, failed to find a buyer for its 106 stores.
Simon Monks, a restructuring and insolvency director at Azets, an accountancy firm, said the “peak of business failures” had not yet been reached.
This week FRP Advisory forecast another rise in restructuring activity after the number of company collapses reached its highest level since the financial crisis. The corporate restructuring specialist said that inflationary pressures on companies, along with the increased cost of borrowing, had led to a rise in enquiries for its services.
Manufacturers and retailers were struggling most in the present economic climate and would be in greatest need of support in the year ahead, the Institute for Turnaround has warned. Andy Leeser, the organisation’s chairman, said the automotive sector was a “case in point”, with issues relating to Brexit, electric vehicles and ESG — environmental, social and corporate governance — all putting pressure on the industry.
British restaurant company insolvencies in December in 2022 were the highest in at least four years, according to Mazars, the international audit, tax and advisory firm. A total of 188 restaurant companies fell into insolvency in December 2022, 71 per cent more than the 110 that failed in December 2021 and the highest monthly number of insolvencies in the sector since at least January 2019.