According to official statistics, the number of company insolvencies in England and Wales reached a 13-year high in the three months leading up to the end of June as rising energy prices forced a record number of businesses out of business.
The Office for National Statistics (ONS) reported that there were 5629 insolvencies in the second quarter, which was the most since the third quarter of 2009, when the UK was deeply affected by the global financial crisis.
The rate at which businesses are failing is 46% greater than the quarterly average data for England and Wales that were obtained during the four years prior to the coronavirus outbreak.
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In a study conducted by the ONS in August, more than one in ten UK businesses indicated that they faced a “moderate-to-severe” danger of going bankrupt, indicating that the combination of rising expenses and a dimming prognosis for the economy is burdening enterprises. The majority of small businesses with fewer than 50 employees indicated a moderate-to-severe danger of insolvency.
Rising energy costs are now the number one concern for more than a fifth of enterprises, up from 15% in February and reaching 30% for businesses with fewer than 50 employees.
The ONS listed several potential contributory causes include challenges with debt repayment, rising raw material prices, and supply chain interruptions.
A restriction on wholesale energy prices was among the emergency support measures for businesses that the government unveiled last month to help them get through the winter.
The support, which the government expects to pay £22 billion to £48 billion for, will only last for six months, and the price of electricity is still around twice what businesses were paying in October.
As the cost-of-living crisis fuelled by skyrocketing gasoline prices, inflation, and mortgage rates crushes household budgets, consumers are also reducing their spending.
According to the ONS, the rise in insolvencies may also indicate a “natural adjustment in patterns” following a decline during the pandemic as government assistance programmes helped businesses recover.
More than half of all business insolvencies in England and Wales in the first half of this year were in the construction, manufacturing, lodging and food services, and wholesale and retail trade sectors.
Since February 2021, when the number of corporate insolvencies in England and Wales averaged less than 750 per month, they have increased significantly. According to the ONS, the number of insolvencies in England and Wales peaked in the fourth quarter of 2008 at 6943.