Corporate insolvencies have been increased.

Data from the Insolvency Service yesterday showed that the number of registered company insolvencies reached 1,783 last month. That is 17 per cent higher than in the same month of 2022 and a third higher than in February 2020, before the onset of the pandemic. Corporate insolvencies are formal measures taken when a business can no longer pay its debts. There were also 158 compulsory liquidations last month, more than twice the number in February 2022 but 32 per cent lower than in February 2020.

Jeremy Whiteson, partner at the law firm Fladgate, said the failure of Silicon Valley Bank had «added to the growing list of risk factors» for companies, including higher borrowing costs, staff shortages and regulatory changes on imports from and exports to Europe. Since November last year, the Bank of England has raised interest rates from a record low of 0.1 per cent to 4 per cent, making it more expensive for the governments to borrow money. As a result, prices for materials for UK businesses rose at an annual rate of 14.1 per cent in January, more than five times the 1985-2020 average. At the same time, the economy contracted in the third quarter and stagnated in the last three months of 2022, as the cost of living crisis hit household finances and business activity.

In a blog post last week, Jelle Barkema, the BoE’s lead data science analyst, said the sharp rise in corporate insolvencies was unlikely to pose «an imminent financial stability issue» because most of the businesses going bankrupt were small and had exposures in part guaranteed by the government. But Barkema added that stability could be hit «as macroeconomic challenges continue to accumulate, government loan payments become due, financial conditions tighten, and larger, more complex insolvencies start to crystallise».

www.sba.tax

Comments

Cloud Bookkeeping

US FED rate rise.

The US Federal Reserve officials have indicated that they plan to resume increasing interest rates to control inflation in the world's biggest economy. During the June meeting, the Federal Open Market Committee reached a consensus to keep interest rates stable for the time being to evaluate whether further tightening of policy would be necessary. However, the majority of the committee anticipates that additional rate increases will be required in the future. The minutes of the meeting have recently been made public. According to the minutes, most participants believed maintaining the federal funds rate at 5 to 5.25 per cent was appropriate or acceptable, despite some individuals wanting to raise the acceleration due to slow progress in cooling inflation. Although Fed forecasts predicted a mild recession starting later in the year, policymakers faced challenges in interpreting data that showed a tight job market and only slight improvements in inflation. Additionally, officials gr...

EU business slide.

S&P Global’s flash eurozone composite purchasing managers’ index, a key gauge of business conditions for the manufacturing and services sector, fell 1 point to 47.1, figures showed yesterday. That is its lowest level since November 2020 and the fourth consecutive month below the crucial 50 mark separating growth from contraction. One of the few bright spots in the survey was that companies in all sectors reported a slight easing of cost pressures, price growth and supply chain constraints. However, prices charged for goods and services still rose at the sixth fastest rate since such data started in 2002. Jobs growth increased marginally from October but remained low compared with the past 18 months. Following a few months of falling price pressure in manufacturing and services, the October print shows an overall stabilisation said Jens Eisenschmidt, chief European economist at Morgan Stanley. However, German businesses, at the hub of Europe’s energy crisis, reported that manu...

Tariffs on UK electric cars.

The European Commission has confirmed that it will continue with its plan to impose tariffs on electric cars exported between the UK and EU starting next year. This is due to the "rules of origin" requirement that mandates EVs traded across the English Channel to have 60% of their battery and 45% of their parts sourced from the EU or UK or face a 10% tariff. A senior Commission official, Richard Szostak, recently informed parliamentarians from the UK and EU that the bloc's battery investment has significantly declined, making the tariffs necessary to encourage domestic production. In 2022, the EU's share of global investment in battery production shrank from 41% to only 2% after the US offered substantial subsidies through its Inflation Reduction Act. Starting in 2024, car manufacturers in the UK will need to have 22% of their sales come from zero-emission vehicles, which means they may need to import EVs from the continent to meet this requirement. If EU carmakers ...

Search This Blog