UK insolvencies predicted to rise

Trade credit insurance provider, Allianz Trade, have predicted that business insolvencies will increase 37% this year, which would see the UK becoming the first big European economy to reach pre-pandemic levels of corporate insolvencies.

The withdrawal of government Covid support schemes, rising energy and fuel costs, supply chain issues, the ongoing war in Ukraine, and Brexit, are all being listed as the main factors for the predicted wave of insolvencies.

Allianz Trade say global factors will likely push business insolvencies up significantly in 2022, followed by a further 4% increase in 2023. The rebound in insolvencies in 2021 and 2022 is in contrast to the artificial low recorded in 2020. In annual terms, the trend reversal appears limited (+4% to 16,310 insolvencies in 2021) but conceals a massive bounce back in the last two quarters (+36% y/y in Q3 and +42% y/y in Q4, respectively) that gained even more in Q1 2022 (+96% y/y).

The main reason for the insolvencies point to voluntary liquidation proceedings which are particularly prevalent in the utilities, construction, information/communication and business services. The UK stands out with a high share of fragile firms (17% compared to 12% in France and 6% in Germany) when looking at profitability, capitalisation and interest coverage recorded in 2021 financials.



The UK is expected to outpace its European peers for forecasted business failures, according to Allianz Trade’s research. It expects insolvencies to remain artificially low in Germany, France and Italy owing to ongoing state support as businesses contend with the impacts of the pandemic. Germany is expected to post a 4% increase in 2022, France 15% and Italy 6%.