Company insolvencies rise 27% in June as interest rate hikes hit firms

The number of UK firms entering insolvency jumped last month as businesses came under pressure from higher borrowing costs and waning consumer demand. Official figures from the Insolvency Service revealed that 2,163 insolvencies took place in June. It said this represented a 27% jump against the same month last year and put the UK on track for the worst quarter for company failures since 2009. However, this was a monthly reduction after 2,552 company insolvencies were registered in May. The new data showed that the vast amount of collapses were creditors’ voluntary liquidations, in which bosses choose to fold their firms. There were 11,759 for June, reflecting a 21% increase year-on-year. Meanwhile, compulsory liquidations jumped 77% to 260 for the month after a surge in winding-up petitions presented by HMRC. There were also 130 administrations in June, after 44% rise against the same month last year. Bakery and coffee chain Le Pain Quotidien was among firms to fall into administration in June, with the group shutting all but one of its UK sites and cutting 250 jobs as a result. Sarah Rayment, managing director and co-head of global restructuring at Kroll, said: ‘Ultimately, I don’t think this comes as a surprise. Many companies emerged out of the pandemic already over leveraged. ‘They are now managing higher borrowing costs and cost inflation, alongside wider economic factors. ‘It’s inevitable not all will survive, especially those in consumer facing sectors.’ Nick Fisher, president of insolvency and restructuring trade body R3, said: ‘Despite the monthly fall in corporate insolvencies, levels are higher than they were this time last year – and well above what they were this time two, three and four years ago, as the hangover from the pandemic combines with a challenging trading climate caused by a number of economic issues. ‘Firms are trading in a time of cautious consumer spending and rising costs, which are hitting margins and profits hard. ‘Directors expect costs and wages to rise further as the year goes on, and if these don’t translate into more demands for goods and services, it could be the final blow for those businesses that are just managing to survive.’