The number of company insolvencies in England and Wales hit a 13-year high in the three months to the end of June, as soaring energy costs forced a record number of firms out of business, according to official figures.
There were 5,629 insolvencies in the second quarter, the highest since the third quarter of 2009 when the UK was in the grip of the global financial crisis, the Office for National Statistics (ONS) said.
The rate that companies are going bust is 46% higher than the average quarterly figures recorded for England and Wales over the four years before the coronavirus pandemic.
More than one in 10 UK businesses reported a “moderate-to-severe” risk of insolvency in a survey conducted by the ONS in August, in a sign that a combination of higher costs and weakening economic outlook are weighing on companies. Small firms with fewer than 50 staff were the most likely to signal a moderate-to-severe risk of insolvency.
More than a fifth of businesses cited soaring energy prices as their main concern, up from 15% in February and rising to 30% among firms of up to 50 staff.
The ONS cited other potential contributing factors including difficulties in paying debt, the rising cost of raw materials and supply chain disruptions.
Last month, the government announced an emergency package of support for businesses, including a cap on wholesale energy prices to help them get through the winter.
However, the support, which is expected to cost the government £22bn to £48bn, will be in place for only six months and the cost of electricity is still about double what businesses were paying last October.
Consumers are also cutting back on spending as the cost of living crisis fuelled by soaring energy bills, inflation and mortgage rates hammers household budgets.
The ONS said that the growth in insolvencies could also be a “natural adjustment in trends” after a fall during the pandemic as government support measures propped up businesses.
Construction, manufacturing, accommodation and food services, and wholesale and retail trade industries accounted for more than half of total business insolvencies in England and Wales in the first six months of this year.
“All of these businesses were heavily affected during the pandemic and many of them have been struggling to survive the lifting of pandemic government support, as well as high energy prices,” Inga West, a restructuring and insolvency counsel at the law firm Ashurst, said. “Business confidence is falling. It seems likely to get worse before it gets better.”
Corporate insolvencies in England and Wales have risen markedly since hitting their pandemic low of fewer than 750 a month in February 2021. The ONS said that insolvencies in England and Wales hit a peak of 6,943 in the fourth quarter of 2008.
