The toll of surging interest rates and energy bills was laid bare in new figures that showed the number of firms going bust in England and Wales jumping to the highest in at least four years.
(Bloomberg) — The toll of surging interest rates and energy bills was laid bare in new figures that showed the number of firms going bust in England and Wales jumping to the highest in at least four years.
The total surged to 2,457 in March, a 16% increase on a year earlier, according to the government’s Insolvency Service.
It was the highest number of corporate failures since the monthly data began in January 2019, while there was also a sharp uptick in debt relief orders and company voluntary arrangements.
It means insolvencies in the first quarter remained around the levels seen in the fourth quarter of last year, which was the highest since 2009 when the financial crisis struck.
The figures suggest that higher borrowing and energy costs are causing major damage to firms’ finances, potentially weighing on the economy and employment. Banks are bracing for a further increase in defaults and experts have warned of more insolvencies ahead.
“Company insolvencies will likely continue to rise in the short term, making for a challenging spring,” said David Kelly, head of insolvency at PwC.
“Businesses are struggling to secure financing and pay off their loans due to high interest rates and the wider impact inflation and consumer sentiment is having on sales and cash flows.”
Nick O’Reilly, director of restructuring and recovery at MHA, said businesses are facing a “perfect storm of high energy bills, increasing interest rates and detrimental inflation,” meaning administrations will continue to rise.
Measures to protect companies from insolvency during the pandemic were largely removed in 2021, leaving businesses exposed to the Bank of England’s most aggressive interest-rate rises in three decades and soaring energy bills. The shock has hit sectors such as manufacturing and hospitality most.
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