Pro-active Approach Urged as UK Business Insolvency Soars.

August 31, 2023
Blog

A growing number of UK businesses are on the brink of collapse as company insolvencies reach their highest level in 14 years.

Amid high inflation, stubbornly high interest rates and more stringent business loan requirements, the latest government insolvency figures highlight how tough economic circumstances are driving many small and medium businesses to the wall.

There were more than 6,300 registered company insolvencies in Q2 2023, the highest number since the second quarter of 2009, and 13% higher than in the same period last year. The vast majority were creditors’ voluntary liquidations (CVLs), a formal process that allows business directors to voluntarily shut down an insolvent company in financial difficulty – alarmingly, it was the highest quarterly level for CVLs since 1960, when the series began*.

The number of compulsory liquidations also rose, but remained slightly lower than pre-pandemic levels.

Wilko Collapse Highlights Economic Challenges

The sobering statistics highlight the circumstances surrounding the collapse of Wilko, which went into administration in early August, putting more than 12,000 jobs at risk. The discount homewares retailer borrowed £40 million from restructuring specialist Hilco last year, and despite efforts to cut costs and restructure leadership, it has struggled to maintain sales and meet its financial obligations.

While Wilko’s financial woes have dominated headlines, the wider story is the rising number of small and medium business owners at risk of insolvency or bankruptcy, says BABR’s Paul Bailey. “Businesses of all sizes are finding it difficult to continue to trade in the current economic circumstances,” he says. “As banks and other financial bodies are reluctant to lend to businesses with high debt levels, we have noticed that more business directors and entrepreneurs are seeking expert advice about restructuring, informal strategies, debt recovery, and cashflow solutions.”

Demand for Expert Insolvency Advice

Directors concerned their businesses may be in financial trouble should take a pro-active approach. “While nobody wants to be in the position of having to consult an insolvency practitioner, the earlier you seek advice, the more options you tend to have,” Paul Bailey says. “Being pro-active helps reduce the stress and uncertainty for you and your employees; you will better understand the different types of insolvency procedures available so you can make an informed decision about the best course of action.”

Since 2007, BABR has been working with UK businesses to help them determine their best path forward through economic challenges. The breadth of experience and expertise within our team enables us to offer a comprehensive insolvency and restructuring service, including expert guidance on: