Insolvencies rise in February as low confidence begins to bite
More than 2,000 companies filed for insolvency in February as a growing number of firms struggle to cope with soaring taxes and high inflation.
Business confidence has tumbled with companies preparing for the worst before Chancellor Rachel Reeves‘ £40bn tax raid comes into effect next month.
But the latest data from the Insolvency Service showed a number of businesses are already coming unstuck.
The number of insolvencies in England and Wales rose by 3 per cent between January and February, with 2,035 companies winding up.
Compulsory liquidations reached its highest level since 2014.
It means a growing number of companies are receiving an order from a court, shareholder or director.
The vast majority of insolvencies were made up of creditors’ voluntary liquidation.
The insolvency rate for England and Wales has also continued to stay well above lows seen in 2020 and 2021.
Figures from the Insolvency Service also showed that construction was the hardest hit sector in the year to January, accounting for 17 per cent of cases.
It follows recent data by S&P Global’s UK Construction Purchasing Managers Index showing that construction output hit a five-year low in February.
Several recent surveys have suggested that the economic outlook looks bleak.
A survey by BCG’s Centre for Growth on the “State of UK Business” showed that around 800 bosses believed a recession was likely this year.
Most respondents said an increase in national insurance contributions (NIC) would increase costs.
But in response to the latest data released by the Insolvency Service, Jennifer Lockhart, an insolvency specialist at the law firm Brabners, highlighted one positive to take away.
She said the 7 per cent decrease in insolvencies compared to February 2024 was a “silver lining”.
“That said, firms have struggled with sluggish demand for some time now, and a slow-start to 2025 – shaped by brittle consumer confidence and an unexpected increase in inflation – will have further compounded issues for those management teams already struggling to keep their heads above water,” she added.