Insolvency update – stormy waters ahead in 2023

The data that had been released on 31 January 2023 by the Insolvency Service shows that the number of corporate insolvencies in England and Wales has risen to 5,995 in Q4 2022. This means that there has been a seven percent increase since the previous quarter.

Unfortunately, this does not come as a surprise as the number of insolvency enquiries that we have been receiving since November continues to rise. With rising interest rates, high inflation and depressed consumer demand, it seems likely that the number of corporate insolvencies will remain high and likely increase further in Q1 of 2023 and possibly beyond.

A sector that continues to be hit especially hard by these pressures is the hospitality sector. This is due to the sky-high energy costs and shortages of staff – conspiring to push many businesses to the brink of insolvency.

HMRC struggle to recruit staff

However, it is not just the hospitality sector that has been feeling the strain due to lack of labour. At this point in time, HMRC has its own struggle to recruit staff, although that has not slowed the ever-increasing number of winding-up petitions that have been issued by HMRC.

Interestingly, it feels as though the outlook has improved since Christmas 2022 as we can see ahead to what appears to be a peak in base rates at below five percent and inflation seems to be on the decline, albeit more evident in some sectors rather than on a headline basis.

Balancing pressure-inducing variables

Businesses will need to be able to balance a number of pressure-inducing variables in the upcoming months, including any further interest rate increases and the reduction of the Government’s Energy Bill Relief Scheme in April which will only make things worse. In the meantime, many businesses will be stuck trying to constantly put out fires in fire-fighting mode for a while longer.

Cash remains king

Cash remains King so keep a watchful eye on any credit you have extended to your customer base as there are still some stormy waters ahead.

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