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».

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