The latest figures from The Insolvency Service show an increase in registered company insolvencies in England & Wales of 79% to 1,817 in May compared with 1,014 in May 2021. In Scotland there was an increase of 82% compared with May last year with a total of 93 company insolvencies.
This increase was, in our opinion, inevitable and we anticipate the upward trend to continue given the ending of both pandemic support schemes and the moratorium on some forms of debt recovery during the pandemic – see here for our previous explanation.
These May figures do not include sector breakdowns due to the time taken for industry classification to be captured from the Insolvency Service systems following a company entering compulsory liquidation. However, looking at previous months, the sectors with the highest number of insolvencies are construction, motor trade and hospitality.
This does not come as a surprise to us, given the sharp increases in construction raw material costs coupled with supply issues; the shortage of computer chips continuing to impact the supply of new vehicles and the current squeeze on household budgets that will be hitting discretionary spend at a time when hospitality is still trying to recover from pandemic lockdowns.
The recent series of interest rate hikes will continue to cause problems to all companies who rely on external finance, and we expect the commercial property sector to be severely impacted due to a number of factors. These include the high level of ringfenced covid rent arrears which are estimated to be in excess of £6bn; the increased finance costs following recent base rate rises (with probably more to come) and fears of a recession likely to impact demand as businesses look to cut back on space in order to reduce their property costs.
At the time of writing, the country is being held to ransom by the RMT who have effectively closed the country down forcing staff to once again work from home which is yet another blow to so many businesses.
As we have said before, any business that is worried about their financial viability needs to act decisively and seek independent professional advice. We strongly believe that, if advice is sought early enough, we can prevent companies from being part of the next statistics to be issued by The Insolvency Service and that is why we are always available for an initial zero cost assessment which can be arranged by contacting Alistair Dickson.