Published bySimplicity

The highest number of company insolvencies seen in 2009

So far this year, we've witnessed an increase in insolvencies and companies going into voluntary liquidation. This is related to the persistent cashflow difficulties among businesses.

According to UK government figures, the year 2023 will see the largest number of company bankruptcies since 2009. These figures also show a 25% increase to nearly 40,000 companies nearing financial collapse in the past three months.

What's driving the notable upswing in insolvencies?

Figures from before the pandemic show a constant variation in insolvencies, with a dramatic drop during the lockdown period. The implementation of COVID-19 support measures, such as the furlough scheme, bounce-back loans, and HMRC's forbearance, effectively curtailed the rate of business failures. However, with the end of these supports and the increase in interest rates, we are now observing a surplus of companies declaring bankruptcy.

Which industries have been hit the hardest?

The top four sectors that experienced the most significant impact in Q3 2023 were business services, construction, hospitality, and retail. Notably, the hospitality and leisure sector saw a substantial 26% increase in insolvencies. With the London region being hit the hardest.

The construction industry, in particular, has received considerable attention as a result of a sharp increase in business failures, with almost 6,000 in severe condition. This includes some prominent global construction companies. Experts have expressed concerns about the potential for widespread insolvencies within the construction sector, which could trigger a significant 'domino' effect throughout the supply chain. A total of 4,165 construction companies collapsed in the 12 months leading up to March 2023, having a severe impact on companies that did not have Trade Credit insurance tied to their supply chain.

What steps can you take to safeguard your business from the increasing instances of company insolvencies?

Trade Credit insurance is a vital shield for businesses, mitigating the risk of revenue loss when a customer or client cannot settle their debts due to insolvency, ensuring that you still receive payment for your products and services.

When a company lacks Trade Credit insurance, the repercussions of a client's insolvency can be substantial. Causing a significant effect on the operations and cash flow of the affected business.

When trading with companies, please ensure you trade within your allocated credit limit. This ensures that the outstanding balances are covered by debt protection, mitigating the risk to yourself and your business in the event the company goes bust.

Keep in touch with your clients; by doing this, you’ll build relationships with your clients. In turn, results in it being more likely your clients will inform you of any potential cash flow issues. You can then decide how to proceed based on what best suits your company.

Not all business is good business!

Where available, Simplicity will provide you with debt protection to trade, giving you that added value and peace of mind that should your Client be unable to pay its debts and enters insolvency, you are covered (subject to terms and conditions).

We ask that you remain vigilant and inform us straight away if you hear that your Client is struggling to make payment of their debts or if you hear of anything adverse. To minimise your risk, you should always trade within credit limits and work with us where possible to avoid overtrading.

Download our useful guide on credit limits here or read our previous blog on Insolvencies on the rise