Is the Business Insolvency rate in the UK about to soar?

Since the beginning of Covid-19, the UK media have been predicting a surge in business insolvencies. Normally, most people would expect that the closures of businesses and limitations on consumer spending would cause bankruptcies to go up. That hasn’t happened, at least not to the predicted level. But what do the current UK trends suggest about business insolvency in 2023?

Government support staved off our insolvency rise.

Shortly after the first lockdown, business and personal insolvencies went down. This was mainly due to the UK government’s comprehensive support system, which included guarantees of loans, salary furloughs, and restricted debt collections.

Their support system worked so well in fact that insolvency rates were closer to those back in 2008. It could be argued that businesses that would have ordinarily been forced to close their doors used the government’s pandemic assistance to stay open.

Now that it is a ‘business as usual’ post-pandemic we should expect to see a rise in the company insolvency rate in the UK.

Not all businesses survived bankruptcy throughout the pandemic

If there is one thing that evolution has taught us it is that those species that can change and adapt themselves to new environments tend to survive. The world of business in this respect is no different: Many restaurants and retail outlets that depended entirely upon physical footfall, for the most part, did indeed fall. Rent for some became too big an expense too, leading some major brands to be forced into insolvency.

Many existing online brands and those that migrated from a physical to a virtual presence tended to do very well in what otherwise was an economic downturn.

Creditors voluntary liquidations

If we were to compare insolvency numbers in the latter half of 2022 with the same period of 2021, we would see a 40% increase in the level of company insolvencies. This is due to a few reasons. Chief among them:

1. This is the first significant period without government pandemic support since they had started issuing financial assistance.
2. Rising energy prices and the general cost of living have caused many customers to default on payments with a resulting negative effect on companies.
3. Directors who misused the government bounce-back loan and furlough have been (and still are) heavily scrutinised by insolvency practitioners.

This is perhaps the change we alluded to earlier leading many company directors to call it a day and place their companies into liquidation, even though there may be insufficient assets to pay their creditors.

What can we expect as we progress further into 2023?

It is a desolate wasteland out there with many businesses having fallen during and – as we have highlighted – post-pandemic, but it’s not going to stop there.

Global economics / political unrest and the resulting impact on England’s economy have resulted in disruptions to our supply chain, soaring inflation and unprecedented energy costs. With all of this going on it would be natural to expect a rather fast influx of insolvencies as we progress further into the year.

But as Winston Churchill once said:

“I would say to the House, as I said to those who have joined this Government, I have nothing to offer but blood, toil, tears and sweat. We have before us an ordeal of the most grievous kind. We have before us many long months of toil and struggle.”

The businesses upon our fair land who are willing to adapt, and change stand a greater chance of surviving what is set to be a very challenging year ahead for all of us.

If 2023 is looking to be a year in which your business is going into liquidation, then We Sell Any Company.com can help you get the best price in the fastest time or simply offer advice and guidance. Click here to find out more.