Company insolvencies rise 27% in June as interest rate hikes hit firms

The number of UK businesses entering insolvency has surged in recent months, with higher borrowing costs and weakening consumer demand putting pressure on companies. Official figures from the Insolvency Service have revealed a 27% increase in insolvencies in June compared to the same month last year, indicating that the UK is on track for the worst quarter of company failures since 2009.

However, there was a slight monthly reduction in insolvencies, with 2,163 cases recorded in June compared to 2,552 in May. The latest data highlights that the majority of collapses were creditors' voluntary liquidations, where company bosses choose to close their businesses.

In June, there were 11,759 such liquidations, marking a 21% year-on-year increase. Additionally, compulsory liquidations saw a significant jump of 77% to 260 cases, following a surge in winding-up petitions presented by HMRC.

Furthermore, there were 130 administrations in June, representing a 44% rise compared to the same month last year. Among the companies that fell into administration in June was bakery and coffee chain Le Pain Quotidien.

The group was forced to shut down all but one of its UK sites, resulting in the loss of 250 jobs. This serves as a stark reminder of the challenges faced by businesses in consumer-facing sectors.

Sarah Rayment, managing director and co-head of global restructuring at Kroll, commented on the situation, stating: "Ultimately, I don't think this comes as a surprise. Many companies emerged from the pandemic already burdened with excessive debt.

"They are now grappling with higher borrowing costs, cost inflation, and broader economic factors. It's inevitable that not all will survive, especially those in consumer-facing sectors."