Challenging economic conditions have led to an 18 per cent surge in company insolvencies during April, as rising debt levels, higher interest rates, and spending cuts took their toll.
According to data from Companies House, company insolvencies rose to 2,177 in April, up from 1,838 in March. Over the 12 months leading to the end of April, the insolvency rate increased to 57 per 10,000 companies, compared to 52.6 per 10,000 in the previous year.
The current level of insolvencies remains significantly higher than during the pandemic and the 2014-2019 period. However, it is still below the peak of 113.1 insolvencies per 10,000 companies seen during the 2008-2009 recession.
The construction sector was particularly affected, with 4,273 insolvencies reported in the 12 months to the end of March. This sector accounted for approximately 17 per cent of all insolvencies, as companies grappled with inflation and rising labour costs.
Kelly Boorman, national head of construction at RSM UK, noted that many construction businesses are “still recovering from legacy contracts, procured as fixed-cost contracts pre-Covid and subject to litigation.”
Compulsory liquidations in April rose to 300, the highest since January 2019, reflecting the ongoing struggle with increasing debt levels.
Amid this surge in insolvencies, FRP Advisory, the restructuring group, has reported a beneficial outcome. The London-based firm expects its annual profits to rise to £37 million, with projected revenue of £128 million for the year ending April, marking a 23 per cent increase from the previous year.
FRP Advisory has been involved in high-profile restructuring cases, including The Body Shop, Inland Homes, and the parent company of Reader’s Digest. The firm has expanded its market share to 16 per cent from 14 per cent in 2023, handling 76 transactions with a total deal value of £1.4 billion over the year, down from £1.8 billion the previous year.
As the economic landscape continues to present challenges, the rise in company insolvencies underscores the pressing need for businesses to adapt and seek expert advice to navigate these turbulent times.
