Insolvencies on the rise
The Office for National Statistics (ONS) reported 5,629 insolvencies in the second quarter of 2022, the highest since 2009 and the fallout from the 2008 credit crisis!
According to official records, the number of company insolvencies in England and Wales reached its highest level in 13 years. In an August ONS survey, more than one in ten UK businesses reported a “moderate-to-severe” danger of insolvency, indicating that increased prices and a worsening economic outlook weigh on companies. Small businesses with less than 50 employees were the most likely to respond in this manner.
The recent rise in inflation strongly correlates with the increase in insolvencies. When the costs associated with acquiring raw materials, manufacturing, shipping of finished products, labour and many other factors increase, insolvency issues are likely to emerge. In addition, more than a fifth of businesses with up to 50 employees named rising energy prices their primary concern, up from 15% in February and reaching 30%.
The number of companies that are at risk of insolvency globally is on the rise. This increase will have a widespread impact on the global economy. When businesses of all kinds cannot pay off their debts, the general distribution of cash and cash equivalents will always be at risk.
Last month, the government unveiled an emergency business assistance package, including a wholesale energy price cap to help enterprises get through the winter. However, the government’s help, anticipated to cost £22 billion to £48 billion, will only last six months for the majority. This is because the electricity cost remains roughly double what businesses paid last October.
According to the ONS, the increase in insolvencies could represent a “natural adjustment in patterns” following a drop during the pandemic as government support measures propped up businesses.
They have also reported a rise in insolvencies, particularly in the following sectors;
- Construction
- Wholesale and retail
- Accommodation
- Food services
- Manufacturing
This list is not exhaustive.
Protecting your recruitment business
As part of our Recruitment Finance Solutions, we provide debt protection as standard. Giving you that added value and peace of mind that you are covered should your Client not pay their debts and enter insolvency.
To find out more about our Recruitment Finance Solutions and how we can help protect your business, please get in touch at 01594 888518 or email sales@simplicityinbusiness.com
Read the Office for National Statistics (ONS) report on rising business insolvencies and high energy prices here