Shuttered shops on Oxford Street, London
(Picture: PA Wire)The number of companies going bust rose by almost a third in December according to official numbers out today, in a stark reminder of the impact of high inflation and the cost of living crisis on businesses.
According to the government’s Insolvency Service, the number of companies registering with it was just under 2,000 in the month, up 32% year-on-year and 76% higher compared with 2019, the last year before the pandemic hit.
The number of compulsory liquidations rose by more than three-and-a-half times year-on-year to 183, up 8% from December 2019. That represented a rise from historic lows in winding-up orders reached during the pandemic, when tax officials at His Majesty’s Revenue and Customs stood back from taking action.
The sobering numbers come after a period of rising optimism that the economy could be proving more resilient than feared after the impact of double-digit inflation and rising interest rates.
While a run of updates on High Street trading in December from big-name retailer have have been mainly positive so far and the overall economy unexpectedly grew in November, there was also news today that Paperchase and British Volt both appointed administrators.
Colin Haig, partner & head of restructuring at advisory firm Azets, called for companies to face up to their problems in timely fashion if they were getting into difficulties.
He said: “Unfortunately, too many management teams are not facing problems early enough and when the decline accelerates often an insolvent liquidation is the only option. That’s not a great option because it’s an end-of-life process for the business.
“It’s strange to say it but an uptick in administrations, particularly where the process has been used as the structure for a pre-packaged sale, is a much better sign of the UK’s economic resilience than an uptick in compulsory liquidations.”
