Spike in insolvencies reveals 'cost of business' crisis
Business insolvencies higher than during pandemic as 'cost of business' crisis hits hard.
Source: Insolvency Service using own data on compulsory liquidations and Companies House data on other insolvency types.
What has caused this spike in insolvencies and for how long will it continue? There are a number of factors at play here. The first is the huge increase in energy costs and the knock on effect on the price of materials and costs of transporting goods. In addition, the government's Covid recovery support schemes stopped in May 2021 and for some businesses having to pay back the loans that propped them up may have been a bridge too far.
Rising inflation and weakening consumer confidence has seen the demand for some consumer goods and services fall, leaving businesses in that sector exposed. Staff shortages will also have had an impact meaning that many businesses have struggled to produce things they can sell or provide revenue earning services. Finally, businesses that exported to the EU may have been tipped over the edge due to the post Brexit increase in regulations.
With energy prices and inflation both forecast to increase and consumer confidence weak as the cost of living crisis bites, the 'cost of business' crisis is not likely to go away anytime soon.
