LONDON: Business insolvencies rise as government aid wanes

LONDON: The number of businesses that
failed in England and Wales last month was the largest since the Covid pandemic
began.

Company
insolvencies in September totalled 1,446, increasing from 1,349 in August and
56% higher than the same month last year, data from the Insolvency Service
shows.

September
saw many firms contend with rising energy and labour costs and the tapering of
Covid government support.

Some
insolvency experts fear the number will rise further.

Energy
companies Utility Point and PfP Energy, musical instrument maker Roli, as well
as chilled food delivery firm EVCL Chill all collapsed last month.

More to go bust?

Claire
Burden, a partner at professional services firm Tilney Smith & Williamson,
said the ongoing energy price rises will “reverberate into additional
sectors” and push more companies such as those in manufacturing and
consumer goods into financial strife.

“This
will cause further failures when combined with existing pressures of increased
transport costs and supply issues,” Ms Burden added.

The Bank
of England earlier this month said one third of small businesses in the UK are
classed as “highly indebted”, where their debt levels are more than
10 times their cash balances.

Matt
Richards, a restructuring and insolvencies partner at accountants Azets, said
he expected the upward trend of insolvencies to continue “now that the
government has withdrawn most of its corporate support measures”.

“The
additional pressures facing businesses today with higher inflation, staff
shortages, increasing energy prices and the need to repay Covid-incurred debt,
is likely to increase the number of insolvencies over the next 12 months.”

An HM
Treasury spokesperson said the government had backed UK businesses with £400bn
of support, including through the Plan for Jobs scheme.

“It’s
working – two million fewer people are now expected to be out of work than
previously feared and the number of redundancies remains near a seven-year
low,” they said.

“We’re
also unlocking investment through the £20bn a year super deduction, the biggest
two-year business tax cut in modern British history, while £650bn of private
and public infrastructure investment will support 425,000 jobs over the next
four years.”