Company insolvencies in England and Wales at highest level since 2009

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Corporate insolvencies in England and Wales climbed to their highest level since the global financial crisis in the six months to September as businesses grappled with high borrowing costs and slowing demand, according to official data.

Insolvency Service data on Tuesday showed that between July 1 and September 30 there were 6,208 registered company insolvencies in England and Wales.

The level was up 10 per cent year-on-year and only 2 per cent down from the previous quarter when it also hit a new peak since the financial crisis.

The rise in insolvencies reflected the ending of government Covid-19 support schemes, the accumulation of debt post-pandemic and high inflation hitting demand.

The data also showed the effect of surging borrowing costs since the Bank of England started raising rates from a record low of 0.1 per cent in November 2021 to the current 5.25 per cent to quench fast-rising prices.

The Insolvency Service said: “The last two quarters saw the highest quarterly insolvency numbers since Q2 2009 and the highest numbers of creditors’ voluntary liquidation since the start of the series in 1960.”

Corporate insolvencies are formal measures taken when a business can no longer pay its debts.

Markets expect the BoE to leave interest rates unchanged at their current elevated level until at least the middle of next year. The next monetary policy decision is due on Thursday.

Mark Ford, partner in restructuring and recovery services at professional services company Evelyn Partners, said: “Company insolvencies have soared this year to levels not seen since the financial crisis of 2007-08 against a grim backdrop of continuing cost increases, a harsh and uncertain macroeconomic environment and continuing friction in supply chains and trading conditions.”

A rise in insolvencies is worrying for the economy as it could lead to a reduction in jobs while hitting output growth, economists said.

“It is difficult to look at these figures and not see a risk of a recession looming,” said Olga Galazoula, partner and global head for the restructuring and special situations group at Ashurst.

The data indicated that higher insolvencies were driven by the accommodation and food service, wholesale and retail trade and manufacturing sectors, which were hit by weak demand and high energy and wage bills.

Separate data from the Office for National Statistics showed that in September retail sales were down 2.5 per cent compared with February 2020 reflecting the impact of high inflation and borrowing costs.

Relative to the number of active companies, liquidations in the four quarters to the end of September were the highest since 2014.

Benjamin Wiles, managing director at financial advisory firm Kroll, said many sectors were vulnerable to rising debt and would be hoping for a good Christmas. “Whether that happens could be make or break,” he noted.

“The cost of borrowing and a lack of access to working capital alongside weak consumer confidence and high inflation means that we will likely continue to see an upward trend over the next 12 months.”