Insolvency specialists Begbies Traynor said the amount of companies going bust could keep rising all the way into 2024, but the growth will be steady rather than a sudden jump.
Profit grew to £6 million last year at the restructuring business last year, as more large firms used its services. Among the insolvencies handled by Begbies were Paperchase, Worcester Rugby Club and the operator of the Park Lane Casino.
According to the Insolvency Service, the number of companies declared insolvent in the year to 31 March was 22,983, up from 16,575.
But further profit growth could be on the way in the year ahead as the company looks like one of the most obvious beneficiaries of a possible downturn.
Ric Traynor, executive chairman of Begbies Traynor Group, told the Standard that his business had already seen a notable rise in companies being declared insolvent: “Numbers are rising. Insolvencies are now above pre-pandemic levels and we expect that to rise.
“For the current year they’ll be even higher.”
But he added that it had been more of a steady rise than a drastic jump.
“We’ve seen a continued trend. There haven’t been sudden blips. We don’t expect a sudden surge, but it will steadily keep increasing.”
He said higher interest rates and inflation had hit many small businesses hard. With the Bank of England widely expected to keep raising rates into next year, Traynor said insolvencies might be more likely to reach their peak in 2024 rather than this year.
Traynor added that other parts of the Begbies Traynor business, such as property advisory, have performed well too. He said these parts of the business, like the insolvencies arm, usually performed well in downturns.
AJ Bell investment director Russ Mould said the firm “has seen increased work for insolvencies, which reflects how businesses can crumble under the pressure of higher rates.
“Many companies have reached a tipping point where they cannot generate enough cash to service borrowings and so they have no choice but to fold.”
Shares were down 2.5p, or 1.9%, to 132p.
