Firms going bust at fastest rate since the global financial crisis in mounting debt storm

Companies are going bust at the fastest rate since the global financial crisis amid a warning that thousands more are in ‘critical’ financial distress.

Official figures showed the number of business insolvencies in England and Wales over the last two quarters was at the highest level since 2009.

Higher interest rates and spiralling costs are pushing many to the brink, and the latest figures will add to renewed worries that the UK is sliding into recession.

Julie Palmer, partner at restructuring specialists Begbies Traynor, said a gathering ‘debt storm’ could ‘send shock waves through the whole economy’.

It came as door and window maker Safestyle became the latest company to fail, with 680 workers immediately made redundant as it went into administration.

Costs squeeze: Official figures showed the number of business insolvencies in England and Wales over the last two quarters was at the highest level since 2009

The figures from the Insolvency Service are likely to strengthen expectations that the Bank of England will refrain from a further rate rise when officials gather tomorrow even though inflation remains well above target.

The figures showed company insolvencies rose to 6,208 in the three months to the end of September, up 10 per cent on the same period last year. That was down slightly since April-June this year, when 6,319 went bust.

But the number of insolvencies in each of the second and third quarters of this year were at a level not seen since the second quarter of 2009.

Olga Galazoula, head of restructuring at law firm Ashurst, said: ‘It is difficult to look at these figures and not see a risk of recession looming.’

Over the past 12 months, the worst hit business sectors have included hotels, restaurants and retailers. 

In the latest three-month period, the construction sector suffered the largest hit, with more than 4,000 firms going to the wall.

Mark Ford, restructuring partner at professional services firm Evelyn Partners, said that it came ‘against a grim backdrop of continuing cost increases, a harsh and uncertain macroeconomic environment and continuing friction in supply chains and trading conditions’.

He added: ‘Escalating interest rates have added to the cost of servicing the already increased debt burden of some firms, made refinancing impossible or punitively expensive for others, and generally made access to funding difficult.’

A separate report from Begbies Traynor showed a 25 per cent rise in firms in ‘critical’ financial distress, to 37,722 in the latest quarter.

‘With many UK companies accustomed to years of near-zero interest rates and access to Government-backed Covid support loans, the new world of elevated interest rates will continue to push many businesses to the very edge of failure,’ it said.

This post first appeared on Dailymail.co.uk