Company insolvencies up 16% on July last year as cost hikes continue to bite
A long period of high interest rates, weak demand and rising costs had hit firms across the UK, experts said.
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Your support makes all the difference.The number of companies that became insolvent in July was 16% higher than during the same period last year, according to official data.
In England and Wales, 2,191 businesses went bust, according to the Insolvency Service, compared with 1,890 in July 2023.
The figures included 320 compulsory liquidations – when a company is forced to shut down, usually because it has debts it cannot pay – which is the highest monthly number since before the Covid-19 pandemic.
We expect insolvency levels to remain elevated for some time yet. While economic conditions are improving, there are many businesses that have had their resilience ground down since the onset of the pandemic ...
David Hudson, restructuring advisory partner at FRP, said the rise reflected “months of high interest rates, weak demand and rising costs continuing to feed through”.
He said: “We expect insolvency levels to remain elevated for some time yet.
“While economic conditions are improving, there are many businesses that have had their resilience ground down since the onset of the pandemic and that are now carrying large amounts of debt, which they’ll struggle to maintain even with falling rates and strengthening consumer confidence.”
Meanwhile, there were 25,551 insolvencies in the 12 months to July 2024, more than at the height of the 2008 financial crisis.
But the Insolvency Service cautioned that part of the reason for the rise in recorded insolvencies since the financial crisis was because there were more companies registered on Companies House.
Back then, the rate of insolvencies per 10,000 companies was 113.1 at its peak. In the year to July 2024 it was 56.6 per 10,000.
The Insolvency Service only records figures for England and Wales, but Scotland also saw a 21% rise versus July last year to 117 insolvencies, according to the Accountant in Bankruptcy, its equivalent government agency.
In Northern Ireland, insolvencies were up 53% compared with last year, but the percentage rise is less reliable because of the small number of companies – some 20 went bust over the course of the month.
Compared to recent years, looking at the big picture, there are reasons to be cheerful ... However, green shoots do not immediately translate into good news for all companies
Sarah Rayment, head of global restructuring at Kroll, said the year-on-year rise in England and Wales “isn’t cause for alarm”.
“Certainly, compared to recent years, looking at the big picture, there are reasons to be cheerful.
“We are keeping a watchful eye on inflation, but broadly there is growth, as well as confidence and economists expect more cuts to the base rate over the next few months.
“There is therefore more natural activity with businesses looking to expand and acquire.
Borrowing costs are still high and many companies are looking to refinance in the coming months. The question is whether they will have enough financial headroom with higher borrowing costs or whether their lenders will give them enough leeway
“However, green shoots do not immediately translate into good news for all companies.
“Borrowing costs are still high and many companies are looking to refinance in the coming months.
“The question is whether they will have enough financial headroom with higher borrowing costs or whether their lenders will give them enough leeway.”
Separately, the Insolvency Service said 10,524 individuals entered insolvency in England & Wales in July 2024.
This was similar to the numbers seen in June 2024 and 24% higher than in July 2023.