Many businesses are struggling with post-Covid debts amid the spike in interest rates and diminishing demand. The UK’s Insolvency Service reported that there were 2,029 registered company insolvencies in November 2022, 21% higher than in November 2021.
Importantly, the high rate of company insolvencies is likely to continue in the coming months in 2023 for the following reasons:
- The demand from workforce for increased wages in line with inflation, pushing up inflation further;
- Supply chain insolvencies/disruption;
- Energy crisis and increase cost of living;
- Both HMRC and the banks pushing for recovery of their outstanding debts; and
- Increased rental costs due to interest rate increases.
Alongside wider economic factors, we are seeing increasing winding up orders from the HMRC, which is another convincing indicator that there will likely be an increase in restructuring and insolvencies in the rest of 2023.
It is, therefore, extremely important that business owners get legal advice as soon as any concerns are identified. This will enable them to understand their legal rights and obligations at an early stage and make decisions armed with this knowledge.