Insolvencies in England and Wales Reach Nearly 14-Year High

LONDON (Reuters) – The number of companies in England and Wales that went insolvent in the three months leading up to the end of September remained near levels seen post-2008 financial crisis, showing only a slight decrease from the previous quarter’s 14-year peak.

The Insolvency Service, a government agency, reported a 2% decline in insolvencies, bringing the total to 6,208 on a seasonally adjusted basis. However, this figure is 10% higher compared to the same period last year.

Many businesses and households are facing intensified pressure from rising interest rates and a surge in the costs of energy and essential items like food.

“The last two quarters saw the highest quarterly insolvency numbers since Q2 2009,” noted the Insolvency Service.

The increase has primarily been driven by a rise in creditors’ voluntary liquidations—a type of insolvency where directors and creditors mutually agree to close an underperforming business—making it the most prevalent form of insolvency recorded since 1960.

Additionally, there were 735 compulsory liquidations, consistent with pre-pandemic levels but reflecting a 46% increase compared to a year earlier. Prior to March 2022, there were restrictions on courts winding up businesses affected by the pandemic.

The Bank of England has raised interest rates 14 times from December 2021 to August 2023, increasing benchmark borrowing costs from 0.1% to 5.25%.

Most economists anticipate that the central bank will maintain current rates following its latest meeting, with no expectations for a rate cut until later next year.

“Escalating interest rates have exacerbated the cost of servicing an already elevated debt burden for certain firms, making refinancing either impossible or extremely costly, thereby creating generally restricted access to funding,” remarked Mark Ford, a restructuring partner at professional services firm Evelyn Partners.