Voluntary insolvencies in England and Wales reached their highest level for 60 years in the first quarter to a backdrop of surging business closures, according to official statistics.
In the first three months of 2022 there were about 4,900 company insolvencies, more than double the number in the same period last year, according to data published by the Insolvency Service on Thursday.
The increase was driven by voluntary liquidations, which rose by an annual rate of 117 per cent to about 4,300, reaching their highest quarterly level since the survey began in 1960.
Samantha Keen, UK turnround and restructuring strategy partner at EY-Parthenon, said that “companies face a perfect storm of increased commodity and energy prices, supply chain disruption and a tightening cost of living squeeze”.
She added: “Facing the end of all Covid-19 government support measures, rising costs and supply chain challenges, many small businesses are now having to make tough decisions about their long-term future.”
In the first quarter, about 137,000 British businesses closed, 23 per cent more than in the same period a year earlier, according to data from the Office for National Statistics.
The figures showed a regional disparity. In the North East and the West Midlands business shutdowns rose 49 per cent, more than double the 19 per cent increase in London.
The level of closures was the highest since comparable records began in 2017, and marked the fourth consecutive quarter in which more businesses were closed than created.
Christina Fitzgerald, president of insolvency and restructuring trade body R3, said the data reflected the “tough climate” in which businesses are operating.
“At a point where many businesses needed a return to normality, rising fuel and energy costs have put them under additional strain,” she said, adding that the cost of living crisis had “prevented the spending boom many were hoping”.
In March, businesses recorded their largest monthly increase in input prices since records began after economic growth slowed to a crawl in February, as most government pandemic support schemes for workers and businesses ended.
Nearly all sectors reported significant increases in business closures, with rises of more than 40 per cent in hospitality, education, wholesales, motor trades, transport and health compared with the first quarter last year.
“We are seeing supply chains collapse in some sectors with suppliers going bust due to increased logistic and transport costs, fuel increases and utility costs in addition to difficulty recruiting staff,” said Kevin Drew, managing director of accountancy group Ascentant Accountancy.
The business closure data tracks the number of companies removed from the business register, which happens when turnover or staff employment is zero over several periods, or when the office is notified that the business has ceased trading. Company insolvencies are formal measures taken when a company becomes unable to pay its debts.