The number of companies going bust surged by nearly a fifth in April despite recent figures showing Britain emerged from recession at the start of the year.
Official data from the Insolvency Service showed that total company insolvencies in England and Wales jumped to 2,177 last month – up 18% compared with the previous month and on a year-on-year basis.
Corporate failures were sent higher in April, having fallen the previous month.
They were largely pushed up by an 18% month-on-month rise in creditors’ voluntary liquidations (CVLs), at 1,715 last month.
There were also 300 compulsory liquidations, up 11% on March, a 36% rise in administrations to 144, and company voluntary arrangements (CVAs) doubled to 18.
The figures come a week after official data showed the UK economy had exited a short recession, with estimated gross domestic product (GDP) growth of 0.6% in the first quarter.
David Hudson, restructuring advisory partner at FRP, said: “Last week’s GDP figures suggest that the UK economy is finally emerging from its lengthy post-Covid hangover.
“But while there is optimism this growth can be sustained, the coming months will continue to be turbulent with more businesses faltering as they weather the legacy of high interest rates, input costs and wage growth.
“Indeed, while we anticipate monthly fluctuations as insolvency levels settle, our own data suggests the profile of firms going into administration is increasingly that of larger employers which will ultimately have a more pronounced effect on supply chains and the labour market.”
The number of company insolvencies hit a 30-year high in 2023 as firms suffered amid high interest rates and cost pressures, with Wilko proving the year’s most high-profile casualty.
Businesses across the UK were hit by a barrage of costs last year, including higher interest rates, energy bills and staff wages, while they also grappled with falling consumer confidence.
While energy costs have come down this year, wage bills have soared, while consumer spending has remained under pressure.
The Body Shop’s UK operations and Ted Baker have been among those to hit the wall in 2024, with retail and hospitality particularly feeling the brunt.
The latest official data shows the construction sector saw the highest number of insolvencies, at 17% of the total, followed by wholesale and retail trade and motor repairs at 16% and accommodation and food services at 15%.
Insolvencies have risen the most in the hospitality sector versus a year ago, according to the Insolvency Service.
Inga West, restructuring lawyer at Ashurst, said the sector’s woes “can perhaps be explained by a multitude of reasons including a time lag of Covid issues, post-Brexit staff shortages, food and energy price increases, interest rate rises and the cost-of-living crisis reducing demand”.
She cautioned “it may continue to get worse before it gets better” for the sector.
