Back in May, we warned that a wave of company failures would hit UK firms in the latter half of 2022. Just three months later, it appears the situation may be even grimmer than predicted. This week, reports revealed that corporate insolvencies were up more than 80% in the past quarter compared to 2021.
This includes 4,908 creditors’ voluntary liquidation procedures, the highest quarterly figure since records began in 1960. This is a real indicator of an insolvency crisis and the uncertain times we endure and face.
The cost of living crises is having a domino effect as people reduce spending on luxuries such as eating out. Consequently, the dining has suffered in particular.
Restaurant were hit especially hard during the Covid-19 lockdowns. There was hope for recovery once the UK opened up again, but there have been further drawbacks. Those still reeling from the pandemic will feel the effects of rising inflation and a drop in disposable incomes.
Several major retailers, insurers and finance companies have issued profit warnings while Made.com Group and Credit Suisse Group A issued three in less than a year.
According to Ernst & Young’s bleak prediction, 20% of companies become insolvent within a year of their third profit warning. And it isn’t just the retail and hospitality sector that has been hit hard.
The construction sector is also grappling with an insolvency crisis. The Construction Enquirer recently noted that construction insolvencies have risen by 72% year-on-year.
According to their report: ‘The spectre of increased insolvency may soon rival materials and labour inflation as the main threat to successful project delivery.’
To add insult to injury, experts warn of impending cryptocurrency insolvencies. While Coin Telegraph reported that crypto companies ‘…forgot the basics of risk management,’ there are media rumblings that some crypto firms are secretly insolvent.e can’t predict the future. But we know that many companies face an uphill battle simply to stay afloat and that’s very much a crisis.
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