UK insolvencies increase as turbulent times lie ahead

The UK insolvency statistics released on 2 August for Q2 2022 (1 April – 30 June 2022) make for fairly sombre, if not entirely unsurprising, reading.

An 81% increase in corporate insolvencies in England and Wales from the same period in 2021 and a 13% increase in insolvencies from Q1 2022. The worst affected sectors are reported to include food, retail and construction.

The increase from Q2 2021 can be put down to the fact that government support measures were in full effect during that period. However, by Q1 this year those measures had largely come to an end and the increase is more likely to be a result of the increased levels of financial stress that businesses are facing.

Some may say that there needed to be a level of market correction in respect of some of the so called “zombie companies” who should have failed even without the impact of the pandemic but who were kept on "life support" by low interest rates, lender forbearance and, latterly, government support measures. What is more concerning is the extent to which these figures now inevitably include companies with a sound underlying business that have found the combination of increased interest rates, supply costs (in particular energy prices) and supply chain disruption simply insurmountable.

What lies ahead?

Those pressures aren't likely to abate any time soon and companies across many sectors are undoubtedly facing turbulent times ahead. Early engagement with restructuring professionals should be encouraged to ensure that companies and their boards are getting appropriate support and guidance.

Here to help

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring & Insolvency team.