Firm bankruptcies on course for worst year since 2009

This year is expected to see the biggest number of company failures since the height of the financial crisis in 2009.

According to official numbers for England and Wales, insolvencies increased by 10% in the three months ending at the end of September compared to the same period last year.

The amount of businesses that are in danger of failing has also increased significantly.

Begbies Traynor, an expert in insolvency, reports that in the last three months, the number of companies in "critical financial distress" increased by 25%.

They are characterised as having judgements over £5,000 from county courts against them, which is frequently a sign that they will fail.

Data compiled by researchers Red Flag for Begbies Traynor shows that about 38,000 businesses are in serious financial difficulties.

Begbies Traynor's Julie Palmer attributed this to a confluence of increased borrowing prices and inflation along with declining demand and consumer confidence.

"Tens of thousands of British companies are in financial dire straits now that the era of cheap money is firmly behind us," she stated.

"Companies who had taken on debt at extremely low-interest rates and relied on government assistance to survive the pandemic now have to face a financial reality check as rising interest rates will affect operating capital for the foreseeable future.

"Taken together with stubbornly high inflation and weak consumer confidence, many of these businesses will inevitably head towards failure."

The industry with the largest increase in businesses experiencing critical difficulty was the construction sector, up 46% in just three months.

Furthermore, during the Covid pandemic, support measures such as furlough, bounce-back loans, and forbearance from HMRC helped to keep company failure rates low. However, at the same time, interest rates and inflation increased, negatively impacting both the bottom lines of businesses and their customers, and these supports ceased to exist.

(Sources: bbc.co.uk)