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Energy cost crisis: Company insolvencies hit 13-year peak

Energy cost crisis Company insolvencies hit 13 year peak Umbrella.UK Insolvency

Energy cost crisis Company insolvencies hit 13 year peak Umbrella.UK Insolvency

New figures from the Office for National Statistics (ONS) show that company insolvencies in England and Wales reached a 13-year peak in the three months to June, as rising energy prices forced many firms out of business.

Survey results from the ONS show that more than one-in-ten firms said they were at ‘moderate to severe’ risk of insolvency, with smaller firms reporting the highest risk.

The 5,629 total insolvencies in the second quarter of 2022 is the highest since the financial crisis in 2009.

Creditors’ Voluntary Liquidations (CVL) were the most common type of insolvency. A CVL allows company directors to voluntarily close an insolvent company and is typically used by smaller businesses.

More than a fifth of businesses said that energy prices were their main concern in August 2022 – up from 15% in February 2022 and rising to 30% among firms with less than 50 staff. 

Last month, the government announced an emergency support package for businesses, including a cap on wholesale energy prices. This price cap for all businesses will last for six months before more targeted support will be introduced.

The construction sector had the most insolvencies in the first half of 2022, accounting for 20% of total insolvencies, followed by retail, manufacturing, accommodation and food services.

The number of insolvencies fell during the coronavirus pandemic when government support helped prop up businesses, but insolvencies started to rise in 2021.

Tom Fox, Licensed Insolvency Practitioner at Umbrella.UK Insolvency, said: “We’re seeing a high number of insolvencies at the moment, particularly among small businesses.

“Lots of business owners are telling us they just can’t carry on any longer. Many never fully recovered after the coronavirus pandemic, or they took extra funding which they can’t afford to pay back.

“The soaring cost of energy is the last straw for the majority of business owners we are speaking to now. And while many of the firms filing for insolvency now are smaller, we expect to see some bigger firms liquidating in the next few months as well.”

For more information about business insolvency, speak to a member of the team today. Call: 0800 611 8888.