Compulsory liquidations in England and Wales were up 77% to 260 due to increased winding-up petitions presented by HM Revenue & Customs. Over three months, insolvencies hit 6,403, up 16% and the first-time quarterly insolvencies has topped 6,000 since the financial crisis, the statistics showed.

Nicholas Hyett, investment manager at the Wealth Club, said: “The combination of higher interest rates and a slowing economy is taking its toll, with quarterly insolvencies nudging over 6,000 for the first time since the financial crisis. The only other time things have looked this bleak was during the early 90s recession.

Hyett went on to point out that the labour market “remains strong, but we’d expect that to change in the months ahead. Unpleasant though it sounds that would be a relief for the Bank of England – which is looking to take some heat out of the economy. If economic data continues to weaken, then there’s a chance the Bank will declare an early victory in its battle with inflation, meaning rates peak at lower levels than anticipated and mortgage holders breathe a big sigh of relief”.

In the long run, exactly what the current spate of insolvencies means for the UK economy is less clear.

Hyett also noted: “There’s been much debate about zombie companies in recent years – businesses that are barely profitable, or heavily indebted that have managed to muddle through in a world where cheap bank loans were easily available. Those companies are likely to be early casualties of rising interest rates. However, if their demise frees up staff and properties for use by more profitable companies, the long run effect could be a boost to UK productivity.”

He added: “Unfortunately, only time will tell whether the current spike in insolvencies is a zombie apocalypse, or an apocalypse of the regular, more painful kind.”

Wealth Club is a non-advisory broker of tax efficient investments such as VCTs, EIS and Inheritance Tax Portfolios. 

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