The number of companies filing for bankruptcy in 2023 is on track to be the highest since 2009 according to UK government statistics. The same statistics have shown a 25% rise in companies at risk of going bust.
Pre-pandemic figures show a steady fluctuation of insolvencies, and a sharp decline during the lockdown period. Support measures during COVID-19 including furlough, bounce back loans and forbearance on the part of HMRC helped to keep company failure rates low. Without those supports, combined with rising interest rates has resulted in a surplus of companies filing for bankruptcy.
The top four most impacted sectors in Q3 2023 were business services, construction, hospitality, and retail. Analysis shows that there was a 26% increase in insolvencies in the hospitality and leisure sector.
The construction sector specifically has been in the headlines for the sharp rise in failing businesses. Among the affected are large, global construction companies: experts have warned that widespread insolvencies in the construction sector may cause a significant ‘domino’ effect across the supply chain. In the 12 months leading up to March 2023, 4165 construction companies collapsed, and have significantly affected the companies without Trade Credit insurance relevant to their supply chain.
Trade Credit insurance protects businesses against the risk of loss of revenue in the case that a customer or client owes you money for products and/or services but cannot pay their debts due to becoming insolvent.
In the case that a company has no Trade Credit insurance strategy in place and their client becomes insolvent, this can have huge impacts to the running and cash flow of that the affected business.
Steve Watson, Executive Director at The Channel Partnership had this to say:
“We continue to see a sharp rise in company failures and with 38,000 companies reported as being in financial distress, the number of businesses that continue to trade but can’t pay is also on the rise.
We continue to receive a large number of enquiries for Credit insurance, from companies not only looking for peace of mind that they will be paid if a customer doesn’t or can’t, but also those wanting a more detailed insight into the credit worthiness of their customer.
Credit insurance can also provide a debt collection solution which, in the current environment, could prove invaluable.”
If you are concerned about rising company insolvencies, and would like to speak to a member of our friendly team about how you can protect your company from upaid debts, please don’t hesitate to contact The Channel Partnership.