UK Company Insolvencies Shoot Past Pre-Pandemic Levels

Following the end of pandemic-era support measures, the number of companies in the UK that declared insolvency last month was 42% higher than before the advent of COVID-19.

Insolvencies dropped markedly during the pandemic, as the British government underwrote some $91 billion in loans to 1.7 million businesses and curtailed creditors' ability to take legal action over outstanding debts.

However, insolvencies have surged from a low of 685 in February 2021, to 1,933 in August this year, 43% higher than August 2021. Business closures peaked in March at 2,120, when the last restrictions on creditors ended. 

The increase in insolvencies has been driven by a rise in firms undergoing voluntary liquidations by agreeing to stop trading, rather than be compulsorily liquidated by authorities. Meanwhile, soaring energy prices have caused many UK businesses to fear for their future as they await the details of promised government support for their bills.

The economic contagion is not only restricted to the UK. Last week Germany reported a 26% annual rise in insolvencies for August and said it would relax requirements for companies to show that they were viable to keep more businesses alive. 

The ongoing troubles in the UK’s economy mirror those of the global economy. Surging inflation is putting a squeeze on households, which is compounded by other factors, like the supply-chain impact of the war in Ukraine.