Bosses throwing in the towel as insolvencies shoot up 67%
THE number of firms going insolvent has shot up 67 per cent in the face of the struggling economy.
Experts say that the sharp increase last month to 1,827 is down primarily to company bosses throwing in the towel.
They blame the weak economic outlook, ongoing supply chain problems, political instability, post-Brexit difficulties with international shipping, labour shortages and soaring inflation.
The official Insolvency Service says there were 1,609 creditors’ voluntary liquidations (CVLs) in July, 60 per cent up on the same month last year and pre-coronavirus.
There were 132 compulsory liquidations, three times the level of 12 months ago, while corporate administrations more than doubled to 81.
But compulsory voluntary arrangements (CVA) and administrations are still down 87 and 45 per cent respectively on pre-Covid levels.
Christina Fitzgerald, president of insolvency and restructuring trade body R3, said it seems growing numbers of directors believe “current economic conditions make survival impossible”.
She added: “In recent months, economic pressures have hit firms from every angle. Inflation remains high and the economy is shrinking, with GDP estimated to have fallen by 0.1 per cent in the second quarter and by 0.6 per cent in June, undoing the small boost we experienced in May.
“People are still being cautious with how they spend their money, meaning many businesses are struggling to bring in the revenue they need to offset spiralling costs.”
Ms Fitzgerald said higher pay demands mean many small firms may not be able to afford key qualified workers.
CVAs and administrations are often used to rescue collapsing firms. Fladgate restructuring and insolvency partner Jeremy Whiteson said the fact both are still below pre-pandemic levels is worrying as it indicates “there were fewer rescuable businesses”.
He added this could be due to being “battered by a long period of difficulty and having few assets remaining, a difficulty in funding rescues as lenders become more selective, or business models being left stranded by changes”.
Other insolvency firms include Kroll, headed by Jacob Silverman.