The number of insolvencies remained stubbornly high in July with the number of compulsory liquidations rising to its highest level since before the pandemic, official figures showed.
New statistics from the Insolvencies Service showed that 2,191 firms went bust in July, seven per cent lower than June but 16 per cent higher than the same month last year.
The vast majority of insolvencies last month were voluntary liquidations, accounting for 77 per cent of the total. But the figures also showed that the number of compulsory liquidations rose to its highest level since August 2018 at 320.
A compulsory liquidation is a process through which a company is forcibly closed down when it fails to meet its obligations. During the pandemic, the number of compulsory liquidations fell to record lows as restrictions were placed on the use of statutory demands and winding-up petitions.
John Cullen, insolvency partner at Menzies said the increase in compulsory liquidations “appears to be a legacy of businesses that have failed since Covid”, suggesting it was a trend that is “likely to continue for a time yet”.
All forms of insolvency have picked up since the pandemic as firms have struggled with a cocktail of weak demand, soaring inflation and high interest rates.
Last year there were just over 25,000 insolvencies, the highest annual number since 1993. Average monthly numbers over the first half of 2024 have been similar to 2023, revealing the pressure that many firms are still facing.
“The latest insolvency figures are a strong reminder that many businesses are still a long way off from recovery,” Rebecca Dacre, partner at Forvis Mazars, said.
Source: Insolvency Service
However, although insolvencies remain relatively high, there are signs that the broader business environment is improving.
The latest figures put inflation at 2.2 per cent, slightly higher than the previous month but well down from the peak of over 11 per cent in autumn 2022.
With inflation hovering at the target, the Bank of England cut interest rates for the first time since the pandemic earlier this month, meaning the Bank Rate now stands at five per cent.
Most economists expect at least one further rate cut to come before the end of the year which will further help to ease the pressure on firms.