Last year saw a record spike in company failures, reaching a peak not seen in 30 years, as rising interest rates and persistent high inflation took a toll on the economy.
Over 47,000 UK firms are teetering on the edge of failure, following a 25% increase in the number of companies experiencing severe financial difficulties in the last quarter of 2023. This surge represents the second successive quarter where there has been a 25% rise in critical financial distress, as revealed in the recent “Red Flag” report by bankruptcy experts Begbies Traynor.
A total of 25,158 businesses declared insolvency, indicating they were unable to meet their financial obligations. This figure, the highest since 1993, was reported by the Insolvency Service.
The hospitality and leisure sectors were hit particularly hard in 2023, witnessing a 28% increase in business failures.
Retailers also faced significant challenges, with insolvencies rising nearly 20%. This trend affected several well-known brands, including Wilko and Hunters.
Although the total number of business failures was at its highest in three decades, the insolvency rate per 10,000 businesses was last higher in 2014.
Experts are concerned about the ongoing effects of the cost-of-living crisis and the gradual impact of households moving to higher mortgage rates, suggesting further difficulties ahead.
Jane Steer, a partner at PwC’s restructuring team, commented: “The recent rise in inflation and weak retail sales figures are causing worries among businesses. They fear that these tough external conditions will continue through 2024, potentially leading to more insolvencies.”
