The toll on companies of high interest rates and inflation became clearer yesterday as official figures showed the third-highest number of corporate insolvencies in England and Wales since the 2009 financial crash last month.

A total of 2,361 company insolvencies were recorded last month, the Insolvency Service reported, up by 17 per cent on June 2023 and by 61.1 per cent in June 2019.

Compulsory liquidation numbers rose to their second-highest level since January 2021 – a sign that creditors are taking a much tougher stance this financial year. Construction, hospitality and retail continue to be among the hardest-hit sectors.

Scotland and Northern Ireland – which have different insolvency laws to England and Wales – reported a 4 per cent annual fall and 13 per cent annual rise in insolvencies respectively in June.

The high total partly reflects an increase in the overall number of companies. The percentage of companies declaring insolvency was slightly higher earlier in 2024 and is below rates in the years after the 2008/09 global financial crisis.
Another reason for the spike might be that many firms must pay rent on their properties in June.

John Cullen, insolvency partner at Menzies, said: “Corporate insolvencies remain significantly higher than they were at the start of the year. This may well be due to the rent quarter day falling in June – if the company cannot afford to meet its property obligations it is a clear sign to directors that something is significantly wrong and filing for insolvency may be the next step.”

Lucy Trott, insolvency expert at Stevens & Bolton, said the figures demonstrate that high levels of company insolvencies have become the “new normal”. “It was widely anticipated we would see a vast ‘wave’ of insolvencies in the immediate aftermath of the pandemic following the withdrawal of the Government’s support measures.

“What we have seen instead is a steady stream of increased insolvencies, driven by high numbers of creditors’ voluntary liquidations, which reflects the tough trading conditions since the pandemic.

“Directors have decided to close businesses due to a number of factors rather than insolvencies resulting purely from creditor pressure.”

Tom Russell, of R3, the UK’s insolvency and restructuring trade body, said small businesses were bearing the brunt of the insolvencies as they face cash flow problems and have limited access to finance.

“The reality is businesses are still trading amidst high costs and cautious consumer spending, and despite recent more encouraging economic data pointing to increasing economic growth and falling inflation, the trading environment is still challenging for many businesses. It seems the economic improvement has come too late for some.”

Personal insolvencies also increased in England and Wales. A total of 10,395 individuals entered insolvency last month, 11 per cent higher than in May 2024 and 33 per cent higher than in June 2023. The numbers included 651 bankruptcies, 4,383 debt relief orders (DROs) and 5,361 individual voluntary arrangements (IVAs).

The number of DROs in June beat the record high set in May. The higher DRO numbers since April are linked to the removal of the £90 administration fee then.

The Insolvency Service said that in the year to June one in 457 adults in England and Wales entered insolvency, lower than the rate of one in 427 who entered insolvency in the 12 months ending 30 June 2023.