Recession fears as insolvencies creep up amid construction woes
The number of insolvencies crept up in October, official data has shown, amid further pressures on the construction industry and worries that Budget measures may sound the death knell for struggling companies.
Data released by the Insolvency Service showed a 1.7 per cent month-on-month rise in insolvencies.
On a year-on-year basis, official numbers show insolvencies jumping 16.7 per cent last month compared to October 2024.
Analysts at consultancies said a continued rise in insolvencies signalled that the risk of a recession was more imminent than expected, though economists’ forecasts widely point to sluggish growth as opposed to an economic downturn.
The total number of companies putting winding up orders up in October was 2,029.
The data showed there were 301 compulsory liquidations in October and 1,592 voluntary liquidations.
There were also 119 administrations, which involves a more formal and large-scale operation to manage decline and a resolution with creditors.
The sector with the highest portion of insolvencies over the 12 months to September was construction, tying in with trends seen in recent months.
It reflects the simmering pressures for the government in its mission to build 1.5m more homes.
Insolvencies ‘signal risk of recession’
Matthew Richards, head of restructuring and insolvency at the advisory firm Azets, said directors had closed down companies due to being squeezed by political scares and costs from trade hits since the pandemic.
“As firms across the UK take every possible step to manage their own outgoings, creditors of every shape and size are now taking every possible step to chase down debt, with HMRC leading the way in its quest to recover money for the Treasury,” Richards said.
“This has added another layer of pressure on businesses at a time when profits have shrunk and expenses have soared, and has resulted in more firms seeking advice and support.
Richards also predicted insolvency numbers would increase in the run up to Christmas.
“With economic growth sluggish, unemployment increasing and many firms struggling to break even – let alone grow – the prospect of a future recession is a real and serious one, and one which will cause further problems for businesses across the country.”
Simon Edel, financial restructuring partner at EY-Parthenon, said: “Companies are now bracing themselves for what could be another difficult Autumn Budget, and further challenges will lie ahead. In this turbulent economic environment, they should remain focused on strengthening liquidity to ease debt pressures.