Home Business News Interest rate rises and increased energy costs have hit companies’ bottom lines leaving 39% of firms insolvent

Interest rate rises and increased energy costs have hit companies’ bottom lines leaving 39% of firms insolvent

by LLB Finance Reporter
22nd Apr 22 3:29 pm

UK company insolvencies have jumped 39% in the last month with 2,114 businesses entering insolvency in March 2022, up from 1,517 in February says Mazars, the international audit, tax and advisory firm.

The figures show that the first quarter of this year has seen the highest number of company insolvencies – 5,197 – in any quarter since Q3 2017.

Mazars says rises in interest rates have made businesses’ debts more expensive to service and is likely to have pushed some heavily indebted businesses into the red. Businesses have also had to deal with spiraling inflation, with energy costs rising by an average of 250% in the first quarter of this year compared to the same quarter in 2021.

These costs, combined with HMRC’s move to recover outstanding arrears from companies that failed to agree a Time to Pay arrangement (TTP), mean that companies are being left with few options.

Rebecca Dacre, Partner at Mazars said, “Businesses that were just hanging on before the recent interest rate rises have seen the rise in borrowing costs push them over the edge.”

“Between interest rates and inflation, this is the most difficult period for businesses since the height of the pandemic. This time they are having to manage without Government support.”

“UK businesses will be hit by the ‘cost of living crisis’, just as consumers will be.”

Mazars adds that the moratorium on winding up petitions ended on March 31. This prevented creditors from applying to make a business insolvent because of unpaid debts during the pandemic period. This end of this additional protection for struggling businesses is likely to lead to even more insolvencies in the coming months.

Dacre added, “With no more Government protection from their creditors, even more businesses can be expected to fail.”

“Insolvency practitioners are now busier than they have been in a very long time. There has long been talk of a ‘wave of insolvencies’ that would happen once the insolvency moratorium was lifted. We’re now starting to see it.”

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