Rising energy bills and staff shortages push UK businesses into insolvency | Company


Rising energy and fuel bills are pushing a growing number of UK businesses into insolvency, as companies struggle to cope with higher costs, supply and staff shortages and withdrawal government Covid support programs.

Business insolvencies in England and Wales jumped more than 80% in the last quarter compared to the previous year, while the number of companies choosing to be liquidated hit an all-time high for at least six decades. They accounted for almost nine out of 10 of the total.

Insolvency experts have warned of a tough autumn where even more businesses could close, including bigger ones, due to falling consumer confidence and demand.

There were 5,629 business bankruptcies between April and June, up 13% from the previous quarter and 81% more than the same period last year, according to figures from the government service insolvency.

This includes 4,908 voluntary creditor liquidations (CVLs), where a company that cannot pay its debts decides to fold. This is the highest quarterly figure since the data series began in 1960.

The number of compulsory liquidations also increased to 368, but remained below levels seen before the pandemic.

John Cullen, business recovery partner at accounting firm Menzies, said: “This indicates the severe cash pressures many businesses are facing, which are exacerbated by soaring energy and fuel costs. Inflation is testing the viability of businesses across all industry sectors and, with interest rates set to rise further this week, the cost of borrowing is also expected to increase.

“At the same time as they face significant cost increases, many businesses are hampered by supply and staffing shortages, which limit revenue at a critical time, just as demand levels recover or return. to pre-pandemic levels.”

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Samantha Keen, corporate insolvency and restructuring adviser at consultancy EY-Parthenon, warned that this is just the beginning.

“Record DVC levels are the first tranche of insolvencies we expected to see involving businesses that have struggled to remain viable without the lifeline of government support provided during the pandemic. We expect further insolvencies in the coming year among large companies that are struggling to adjust to difficult business conditions, tight capital and increased market volatility.

“The impact of slowing consumer spending is expected to be felt in the fall, just as many retail and hospitality businesses prepare for the all-important ‘golden quarter’. These businesses, highly sensitive to fluctuations consumer demand, will be the most vulnerable.”

Christina Fitzgerald, chair of business insolvency and restructuring body R3, said: ‘Many directors are choosing to close their businesses because they lack confidence in their business prospects in the current climate.

She said the drop in household disposable income for the eighth straight month in June would trickle down to businesses, along with soaring costs across the board, supply chain issues and a tight labor market. “It has meant an uphill battle for many businesses, especially those still reeling from the pandemic,” she added.


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