PwC comments on Q2 2023 insolvency data

David Kelly, Head of Insolvency at PwC said:

“Today’s data shows the UK has had the highest quarterly number (6,342) of company insolvencies since the financial crisis in 2009. In total, in the first half of 2023, there have been approximately 13,000 corporate failures. 

“High inflation and the increasing cost base for firms is resulting in the erosion of both liquidity and shareholder value, thus reducing confidence in the ability to hit future forecasts. Coupled with rising interest rates, it is making for a very challenging environment for business. Like homeowners coming off fixed mortgage rates, many businesses have yet to refinance their debt, meaning the full impact of higher interest rates may yet to be felt. 

“An increasing number of larger companies - who have so far been more resilient to the economic pressures - may go into insolvency this year because they tend to have bigger loans and higher levels of debt to pay off. Indeed, in the first half of this year 157 businesses entering insolvency had a reported revenue of over £10m. These firms are an important part of the UK corporate ecosystem - they employ more than 33,000 staff and collectively generated over £6bn in revenue.”
 

Lucy Fulmer, Director and Head of Creditor Markets at PwC said:

“The high number of compulsory liquidations in Q2 of this year is striking - 637 compared to 382 in the same quarter last year. This is driven by an increase in winding up petitions - formal applications from creditors to shut down companies - which our data shows have more than doubled to 2,400 in the first half of this year compared to the same period last year. A lot of this increase can be attributed to HMRC returning to pre-pandemic levels of enforcement action.    

“Consumer sentiment also remains a concern, particularly in the retail, food service and leisure industries, whilst the construction sector is grappling with credit risk brought about by inflationary pressure, labour shortages and increasing interest rates. The hospitality and leisure sector made up 17% of insolvencies in H1 2023, and increased by 38% compared to H1 2022. However, with the start of the summer holidays and energy prices falling, we hope to see the sector begin to recover as the year progresses.”