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Business bankruptcies surge in England and Wales after withdrawing Covid support

Business insolvency surged in England and Wales in the second quarter, with voluntary liquidations reaching their highest quarterly levels since at least 1960, according to official data released on Tuesday.

Between April 1st and June 30th, there were 5,629 registered company bankruptcies, a 13% increase from the previous three months and an 81% increase over the same quarter last year. Bankruptcy service Said.

Company bankruptcy is a formal action taken when a company becomes unable to pay its debts.

John Cullen, business recovery partner at accounting firm Menzies LLP, said the rapid rise “demonstrates the severe cash flow pressures facing many businesses, including rising energy and fuel costs. is exacerbated by the

Voluntary liquidations by creditors reached 4,908 in the second quarter of 2022, the highest since 1960, when the Department of Bankruptcy began collecting such data.

Businesses face the combined threat of rising costs and weakening demand amid the worst divergence in economic activity and inflation since the 1970s. Bankruptcy experts said part of the sharp increase was due to the withdrawal of government measures designed to help businesses. coronavirus pandemic.

Official data last month showed that prices for materials purchased by businesses rose 24 percent annually in June, the highest since records began in 1985.

At the same time, economic growth is slowing under the weight of high inflation and consumer confidence. at record lows.

Cullen added that many businesses are also hampered by supply and staff shortages that have limited revenues at critical times.

Christina Fitzgerald, president of bankruptcy and restructuring industry group R3, said the record level of personal bankruptcy was “a decision to close the business because many directors were unsure of the prospects for the deal in the current circumstances.” are choosing.”

Insolvencies of all kinds increased in the three months to June, including forced liquidations, up 9% from the previous quarter.

Government supportive measures, including temporary restrictions on the use of statutory demands and increased financial support for businesses, have reduced the number of business bankruptcies during the pandemic. But now the bankruptcy rate is 28% higher than he was in the second quarter of 2019.

With measures like furloughs and suspension of fraudulent liability liability removed, “businesses are now facing the realities of post-pandemic financial conditions,” says Lucy Trott of law firm Stevens & Bolton. said Mr.

Claire Baden, partner on the advisory consulting team at wealth and accounting firm Evelyn Partners, said coronavirus-related debt, including loan repayments and HMRC delinquencies, is putting an undue strain on businesses. said he was “concerned” about

Some experts said they expected further deterioration in the coming months as the economy risks slipping into recession and interest rates could rise further.

“Unfortunately, looking ahead, we expect more bankruptcies,” said Stacey Jones, a partner at law firm BDB Pitmans.

She added that this is especially true for sectors such as retailers, food producers and energy-intensive manufacturers that are most affected by volatility in costs and supply chain pressures, as well as volatility in business confidence.

Samantha Keane, EY-Parthenon’s UK Turnaround and Restructuring Strategic Partner, said:

Business bankruptcies surge in England and Wales after withdrawing Covid support

Source link Business bankruptcies surge in England and Wales after withdrawing Covid support

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