The number of company administrations that took place in the first quarter of 2023 increased by 34% when compared to the same quarter in 2022, according to Kroll.
Senior Journalist, covering the Credit Strategy and Turnaround, Restructuring & Insolvency News brands.
Senior Journalist, covering the Credit Strategy and Turnaround, Restructuring & Insolvency News brands.
In total, the quarter saw 288 administrations take place – a sharp increase on the 215 seen during the same period in 2022, with the number of administrations (130) taking place in March being the highest number seen since March 2020, breaking the pre-pandemic average of 116.
Construction and manufacturing continue to lead the way when it comes to the sectors that have seen the most administrations, with 39 and 38 entering this process so far this year respectively. This increase is likely due to a number of factors, including the rising cost of materials and labour, as well as the ongoing supply chain disruption.
Kroll’s managing director for restructuring Sarah Rayment said: “While initially concerning, administrations breaking through the pre-pandemic average should not come as a surprise. We know that the rise in energy price and conclusion of pandemic business support is putting pressure on businesses.
“It is important to remember that a company administration is only one outcome, and quite often when many other options have been considered. We are interestingly seeing more companies coming to us earlier for advice on restructuring, which quite often allows us to make an earlier intervention.
“One area that we are watching closely are the proposed changes to capital requirements for SME lenders by the Bank of England. It could potentially create a barrier to businesses looking to refinance and an alarm has already been raised by many challenger and mid-sized lenders.
“Undoubtedly stubbornly high inflation and interest rates will lead to more businesses failing, but those who are better organised and capitalised will come out of the other side stronger.”