INSOLVENCIES REACHING 2008 FINANCIAL CRISIS LEVELS

THE number of companies becoming insolvent in England and Wales has reached its highest level since the global financial crisis of 2008. A total of 5,629 businesses became insolvent in the second quarter of this year, between April and June, according to new figures from the Office for National Statistics.

That’s up from 4,995 from January to March this year, and up from 3,105 over the same period last year.

In fact, it’s the highest number of insolvencies since October to December 2009, when 5,749 were recorded.

The highest number on record came in the last quarter of 2008 when there were 6,943, which was around the peak of the financial crisis.

The current rise follows a period where the number of insolvencies was falling.

Between April and June 2020 and January and March 2021, the number of insolvencies dropped markedly, most likely due to the measures put in place by the government to protect businesses.

The construction industry has seen a particularly sharp rise in the number of insolvencies.

Some 1,039 insolvencies in quarter two of 2022 were construction firms, while there were 1,044 in quarter one.

That’s up from just 403 in the first quarter of 2021.

It makes the construction industry the largest contributor towards the total number of insolvencies in the country.

Wholesale and retail companies have also seen a sharp rise, going from 326 insolvencies at the start of 2021 to 707 in the first quarter of 2022 and 802 in the second quarter.

So what’s driving the increase in insolvencies?

Well, the ONS says that several factors are likely to have played a role.

They include persistently high energy prices, difficulties in meeting debt obligations, rising costs of raw materials, and supply chain disruptions.

Fuel prices have risen sharply since the start of 2021.

The gas price index rose by 70% between March 2021 and March 2022.

Rising energy prices are becoming a growing concern for businesses across the UK.

Back in March of this year, only 15% of businesses which responded to the Business Insights and Conditions Survey (BICS) said that energy prices were the main concern for their business.

By mid-april that had risen to just over 20% before hitting nearly 23% by early October.

Accommodation and food services companies were particularly concerned about energy prices.

Some 41% of respondents to the BICS said that energy prices were their main cause for concern as of October.

Transport and storage companies (32%) also saw energy prices as their main cause for concern, as did wholesale and retail companies (28%), real estate firms (24%).

In the construction industry, however, the cost of goods is the main concern.

A total of 39% of respondents from the industry said that the inflation of goods and services was their main cause of concern.

The manufacturing industry also saw inflation as their main cause for concern (39% of respondents).