Monthly insolvencies tick up again as firms feel the brunt of the Bank of England’s interest rate hikes

Monthly corporate insolvencies rose year-on-year as companies continued feeling the pressure from the Bank of England’s interest rate hikes, new figures show.

According to figures from the Insolvency Service, there were 1,769 company insolvencies in January, five per cent higher than in the same period last year. This was the highest January insolvency figure for five years.

The increase was fuelled by a rise in forced closures, which climbed 66 per cent year-on-year to hit 339. Compulsory liquidations were also more than double last month’s figures.

“Anecdotal evidence suggests that increase is caused, in part, by an increase in compulsory liquidation petitions by HMRC for unpaid tax,” Jeremy Whiteson, restructuring and insolvency partner at Fladgate said.

Despite the substantial increase in compulsory liquidations, voluntary closures still made up the vast majority of insolvencies. There were 1,294 voluntary liquidations in January, down six per cent on the year before.

The figures also revealed an increase in voluntary administrations, which rose 40 per cent on last year to hit 120.

PwC restructuring partner Zelf Hussain said this indicated a “proactive approach by some firms to address their financial challenges through cost reductions and restructuring rather than outright insolvency.”

Whiteson said that the increase in total insolvencies was no surprise given the various challenges companies have faced over the past few years.

“After the pandemic era lockdowns; Brexit; staff shortages – and rising wage costs; spiralling fuel costs; high interest rates and inflation eroding consumers spending power and confidence; and the contraction in income implied by falling GDP, it is sad but unsurprising that company insolvencies have increased,” he said.

Things are unlikely to get any better despite an anticipated reduction in interest rates later in the year. Forecasts from the Centre for Economics and Business Research (CEBR) suggest that there could be as many as 33,000 insolvencies in 2024, which would surpass last year’s thirty-year high.

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