Businesses received over £80 billion through government loans during the pandemic, Treasury data shows, amid weeks of involuntary closures during government-imposed lockdowns.
(Picture: Getty Images)The number of companies filing for insolvency in England and Wales has hit its highest level in over 12 years in the latest signal Britain could be headed towards a recession.
Over five thousand companies filed for insolvency between April and June 2022, figures from The Insolvency Service show, an increase of over 80% on the previous year and up 13% on the last quarter. The increase was led by a 74% jump in creditors’ voluntary liquidations, which is often used when companies sell off their remaining assets before shutting down altogether.
The rise is part-attributed to an ending of government support for businesses during the pandemic such as bounce-back loans and restrictions on creditor actions, which were discontinued by the end of March 2022. Businesses received over £80 billion through government loans during the pandemic, Treasury data shows, amid weeks of involuntary closures during government-imposed lockdowns.
Stacey Jones, partner at law firm BDB Pitmans, said: “The increase in insolvencies in Q2 2022 is unsurprising given the difficult trading conditions facing many businesses. Companies’ bottom lines and margins are under significant pressure from rising costs, supply chain challenges and the end of all Covid-19 government support.
“Looking ahead, we can, unfortunately, expect a further increase of insolvencies, particularly in sectors most affected by variations in cost and supply chain pressures and fluctuations in business confidence.”
It comes after the Bank of England warned the economic outlook for the UK had “deteriorated materially” amid the Russian invasion of Ukraine and global inflationary pressure.
“Higher prices, weaker growth and tighter financing conditions will make it harder for households and businesses to repay or refinance debt,” the Bank noted in its July Financial Stability Report.
“Given this, we expect households and businesses to become more stretched over coming months. They will also be more vulnerable to further shocks.”
The UK is projected to have 0% growth in 2023 according to forecasts from the OECD, making it the slowest growing economy of the G7 countries.
