The Insolvency Service released the quarterly insolvency statistics for July - September 2023 on 31 October, painting a picture of growing corporate distress. This period saw a total of 6,208 company insolvencies, which together with Q2 2023 marks the highest number of quarterly insolvencies since the midst of the financial crisis in 2009.

Although a comparison with Q2 figures shows a slight reduction of 2% in overall insolvencies, the figures for Q3 showed a marked rise in both compulsory liquidations (14% up on Q2) and administrations (11% higher than Q2).

The sectors with the highest number of casualties continue to be construction, retail and hospitality. While all large industries have seen an increase in insolvencies over the past year, by far the sharpest rise over the 12 months has been in the retail and hospitality sectors. Both sectors are particularly vulnerable to the combination of inflationary pressures and reduced spending as the cost of living crisis continues to squeeze household incomes.

Access to (affordable) finance is also an issue for many companies. The ability to obtain additional support from existing lenders is likely to depend on the health and prospects of the underlying business. Higher borrowing costs mean that refinancing, even where possible, is not to be embarked upon lightly.

The real crunch for retail and hospitality is likely to come next April when the current business rates relief scheme, offering a 75% discount on business rates for eligible retail, hospitality and leisure properties, comes to an end. There is growing pressure for the government to extend the relief for another 12 months – UKHospitality notes that a failure to do so will increase business rates for the hospitality sector alone by around £1bn.

In the meantime, retail and hospitality businesses will be hoping for a better-than-average Christmas season to tide them through to next year, in the context of persistent financial challenges.