Rising interest rates pushed more companies to collapse across England and Wales in May.
Today’s data shows that the number of insolvencies in May has shot up, following a brief dip in April due to the Easter break.
The 2,552 insolvencies is the highest monthly number we’ve seen this year so far and, given that trading conditions remain extremely challenging, the number will likely continue to climb through the second half of the year.
David Kelly, head of insolvency at PwC, said: “In addition, rising interest rates have been a blow to struggling businesses, with the potential for more pain when the Bank of England meets next week to decide the base rate. For small businesses in particular, these higher rates make it increasingly difficult to take on and finance debt, with many having to use their emergency cash reserves to do so, thus intensifying liquidity issues. As such, we’re seeing an uptick in the number of firms needing debt restructuring services and looking at ways to compromise their existing on and off balance sheet liabilities.
“Approximately 99% of liquidations in the first quarter of this year have related to companies with annual turnover of less than £1m. As both interest rates and inflation look set to remain high in the short term, our analysis indicates that this trend will persist, with smaller businesses continuing to come under the most pressure.”
