Number of businesses going bust at 30-year high due tough economic climate

30 January 2024 , 13:02

1113 0

Figures from the insolvency service revealed that 25,158 firms across England and Wales went bust last year including Wilko (Image: PA Wire/PA Images)

Company failures reached a 30-year high as businesses struggled with high interest rates and cost pressures in 2023.

The Insolvency Service revealed that 25,158 firms in England and Wales went bust last year a 14% increase from 2022 and the highest annual number since 1993. The number of creditors' voluntary liquidations (CVLs) rose by 9% to 20,577, marking the highest since records began in 1960.

There were also 2,827 compulsory liquidations, up 44% on 2022, a 27% rise in administrations to 1,567, a 67% increase in company voluntary arrangements (CVAs) to 185 and two receivership appointments. The final three months of 2023 saw the highest quarterly level of companies going bust across England and Wales since the financial crisis.

Businesses across the UK faced a wave of costs last year, including higher interest rates, energy and staff wage bills, while they also grappled with falling consumer confidence. Budget retailer Wilko was the most high-profile casualty of the year, with its failure leading to the loss of more than 12,000 jobs and leaving gaps in many high streets across the country.

Experts have warned that 2024 is set to be another challenging year for UK businesses. Julie Palmer, a partner at insolvency specialist Begbies Traynor, warned: "Thousands of businesses have been pushed into insolvency due to a combination of interest rates at levels we haven't seen in over a decade, pushing the cost of borrowing up, alongside inflation, weak consumer confidence and rising input costs a perfect storm for financial distress."

Martin Lewis’ MSE website shares tip to get free £175 and 7% interest on savings

She added: "With more businesses entering insolvency in 2023 than during the financial crisis, economic conditions must improve quickly, otherwise the fight for survival in 2024 might be a step too far for the battered and debt-laden businesses that managed to survive last year."

The data revealed a 14% year-on-year increase in company insolvencies to 6,788 in the fourth quarter of last year the highest since the end of 2008. This was also 9% higher than the previous quarter.

However, while overall company insolvencies were at a 30-year high in 2023, the Insolvency Service said the number of firms on the Companies House register has increased over time, so the rate of companies going insolvent compared with active companies remained much lower than a peak seen during the 2008-09 recession.

There are also some signs for optimism over the year ahead, with hopes that lower inflation may see the Bank of England cut interest rates this year. Retail and hospitality businesses are bracing themselves for a blow as the national living wage is due to increase.

At the same time, construction firms are feeling the pinch due to higher interest rates causing slowdown in the housing market. Mark Ford, a restructuring expert at professional services firm Evelyn Partners, commented: "While in terms of interest rates and prices the general feeling might be that the worst is over, the trading environment for businesses in the UK remains pretty onerous."

He said: "We can expect the costs environment for some firms to become more challenging, particularly but not exclusively in construction, retail, leisure and healthcare sectors. "It also looks like the crisis in the Middle East might start to choke supply chains, lengthen lead times and possibly restrict the supply of imported materials and components."

According to the Insolvency Service, here are the five industries with the highest number of companies folding in 2023:

Construction led the way with 4,371 closures

This was closely followed by wholesale and retail trade; repair of motor vehicles and motorcycles with 3,929

Accommodation and food service activities saw 3,727 firms close down