The number of firms falling into insolvency increased in January against the same month last year, according to official figures. Total company insolvencies in England and Wales hit 1,671 over the first month of 2023, the Insolvency Service said.
It represented a 7% rise against January 2022 and was 11% above pre-pandemic levels from 2020. Experts said the rise pointed towards the toll of higher borrowing costs and continued elevated levels of inflation for businesses.
Nevertheless, the data showed a decline in insolvencies compared with December, when 1,964 firms became insolvent. The Insolvency Service recorded 189 compulsory liquidations in January, rising 52% year-on-year.
Compulsory liquidations have lifted in recent months partly as a result of increased winding-up petitions from HMRC. The majority of insolvencies were creditors’ voluntary liquidations, which increased by 2% to 1,382 for the month.
Ed Macnamara, head of restructuring at PwC, said: “While the number of company insolvencies in January is down on the month before, any respite is likely to be short-lived. The data, which shows a 7% rise on the year before, serves as a reminder that we are still in the midst of a difficult trading environment with rising interest rates and high inflation which, when combined, generally results in more company failures."
He added: "We’re also seeing an uptick in both late payments and the number of requests to extend credit terms. This domino effect is likely to increase the squeeze on businesses already struggling with their debts and might mean that some are forced into insolvency."
