UK businesses are collapsing at the fastest pace since the height of the global financial crisis as surging energy costs, weakening demand and rising borrowing costs drive thousands of companies out of business.
There were 5,629 insolvencies in England and Wales in the second quarter — the highest level since 2009, according to the Office for National Statistics (ONS). The jump represents the most since the third quarter of 2009.
Insolvencies slumped in 2020 as the government rolled out support to protect businesses during the pandemic, the ONS said.
However, the number of failures has since spiked as companies grapple with fresh challenges even after lockdowns ended.
Businesses cited the sharp jump in energy bills as the biggest problem, while difficulties paying debt, the rising costs of raw materials and supply chain disruptions also took their toll.
While the squeeze on finances has hit all companies, construction, retail and accommodation and food services suffered the highest number of insolvencies in the first half of the year.
Construction businesses accounted for 20% of all insolvencies in the first half of 2022, with the industry registering 2,083 failures. That followed by the wholesale and retail sector at 14%.
Meanwhile, 30% of small firms with 10 to 49 employees said energy was their top worry.
22% of businesses said energy prices were their main concern in August 2022, up from 15% in late February.
In firms with 10 to 49 employees, this figure was 30%. pic.twitter.com/WlvrokC3kG
— Office for National Statistics (ONS) (@ONS) October 7, 2022
Of the respondents, 22% cited energy prices as amain concern in August, up from 15% in February, before Russia’s invasion of Ukraine and the subsequent surge in gas prices.
Meanwhile, over one in 10 companies said they faced a "moderate-to-severe" risk of insolvency in August.
The government has outlined support to help firms and public sector bodies struggling with their energy bills. But, the scheme will run for only six months, unlike the two-year programme aimed at households.