LONDON (Reuters) -- England and Wales are on track for the highest quarterly number of company insolvencies since early 2009, as businesses struggle to repay COVID-19 loans against a tough economic backdrop, government figures showed on Tuesday.
The Insolvency Service, a government agency, said 2,163 companies were declared insolvent in June, up 27% on a year earlier although down from May’s 2,553, which was the highest since monthly records began in January 2019.
Over the three months to the end of June, there were 6,403 companies declared insolvent. If this figure is confirmed when official quarterly numbers are published later this month, it would be the highest non-seasonally-adjusted calendar-quarter total since the first quarter of 2009.
“The monthly figures confirm what we are seeing on the ground - that UK corporates are struggling to cope with a challenging combination of rising interest rates, sticky inflation, higher wage expectations whilst recovering from a hangover of Covid debt,” said Gareth Harris, a partner at RSM UK Restructuring Advisory.
As usual, most company insolvencies were creditors’ voluntary liquidations - where company directors and creditors agree to wind up a company without a formal court order.
There were 260 compulsory liquidations in June, 77% more than a year earlier, which the Insolvency Service said partly reflected more winding-up petitions for unpaid taxes.
However, RSM said it expected the number of insolvencies to fall by more than 10% by the end of this year, despite rising Bank of England interest rates which financial markets expect to reach 6% by November, the highest since 2001.
“The drop is likely to come mainly from a fall in ‘shut down’ Creditors’ Voluntary Liquidations where the catch-up from low points of Covid and Government support will largely be flushed out,” Harris said.
Britain’s government lent businesses 80 billion pounds during the pandemic and put a temporary hold on many debt proceedings, which only fully ended in April 2022.
Meanwhile, the proportion of Britons who say Brexit was a mistake hit a new record high this month, a survey from pollsters YouGov showed on Tuesday.
With few economic benefits to show for the June 2016 vote to leave the European Union, 57% of Britons said the decision to leave the European Union in 2016 was the wrong one, compared with 32% who thought it was correct.
More than half - 55% - said they would vote to remain in the EU, against 31% who said they would stay out, if the referendum were to be held again.
Prime Minister Rishi Sunak said in May that Brexit is delivering benefits, citing his flagship policy of freeports and VAT cuts that he said would make beer and sanitary products cheaper.
Economists say freeports - special zones containing tax and customs reliefs and simplified trade regulations - are unlikely to boost Britain’s economy but may have limited value as a regional development tool.
British business investment has barely grown since mid-2016, in contrast with other advanced economies. While Brexit-supporting economists point to the fact that capital grew strongly in the years leading up 2016 and was bound to slow, business surveys point to Brexit as one cause of the stagnation.
The YouGov survey of more than 2,000 British people showed 63% now regard Brexit as more of a failure than a success, compared with 12% who saw it as more of a success. A further 18% said it was neither.