The number of companies filing for administration jumped by 25% over the course of 2023, as price rises, sluggish growth, persistent high interest rates, and fragile consumer sentiment continued to impact British businesses.
Analysis of notices in The Gazette by Interpath Advisory reveals that a total of 1,307 companies fell into administration in 2023 – up from 1,049 companies in 2022, representing a 24.6% increase on last year.
Blair Nimmo, chief executive of Interpath Advisory, said: “The number of administrations continues to rise as the financial challenges of recent years take their toll on businesses. 2023 was a difficult year for many UK companies and, despite signs towards the latter end of the year that some of the prevailing economic headwinds might be starting to lessen, we’ve seen a steady and incremental uplift of insolvency activity over the course of the past 12 months.”
An uplift in administrations can be seen across a wide range of sectors, with companies operating in the retail, building and construction, leisure and hospitality, manufacturing, professional services, and real estate industries experiencing a notable number of appointments. High profile insolvencies seen across the UK towards the end of 2023 included the administration of leading window retailer and manufacturer Safestyle UK and the administration of the Communisis group, a provider of transactional communications, procurement and marketing services.
Stuart Reid, head of retail for Interpath Advisory, commented: “Retail continues to be a challenging sector with margins under pressure and growth tracking below forecasts, reflecting a change in consumer sentiment and ultimately the effects of inflation and the cost of living crisis.
“We have seen a mix of winners and losers in the Christmas trading figures released so far, even in stronger categories such as food. To ensure profitability and cashflow is maintained a careful focus on stock allocation, pricing and promotion strategy is required in Q1. It will be crucial to proactively mitigate potential availability and supply chain issues due to the ongoing difficulties in the Red Sea.”
Looking ahead to the outlook for 2024, Blair Nimmo concluded: “With industry bodies such as the British Retail Consortium and UK Hospitality warning of a challenging year ahead, ongoing geopolitical uncertainty, and the prospect of elections in both the UK and the USA, the outlook for businesses remains precarious.
“Of course, it’s not all doom and gloom out there. December’s bigger than expected fall in inflation is leading some commentators to predict that interest rates could start to come down sooner than anticipated, we have a resilient domestic labour market and there’s a lot of liquidity in the debt market, which means borrowers continue to have plenty of options. Nevertheless, 2024 will likely remain a period of elevated interest rates by historic standards, and weak consumer confidence will continue to impact those sectors already feeling the pinch.
“To navigate this, businesses should look to recognise warning signs and cash pinch points early, and seek appropriate advice. The more time that is available to deal with the issues at hand, the more options and levers are available to pull.”