The cost of living crisis is likely to be an unwelcome bedfellow for society throughout 2023. Here at Higgs LLP, our Dispute Resolution and Restructuring and Insolvency teams stand ready to support businesses to help them onto a firmer footing. In the first in a new series, we look at the outlook for 2023 and how our teams can support.

The impacts on individuals of rising costs have been extremely well documented over recent months, but the current economic climate is proving unforgiving for many businesses, with smaller companies heavily affected.

There has been a two-pronged attack on business costs. Firstly, non-domestic energy and gas prices increased by 29 per cent and 71 per cent respectively in a year from Q1 in 2021, according to the government’s Quarterly Energy Prices data.

In addition, inflation has led to a significant increase in the cost of general business services and materials.

Increased interest rates means that re-financing is not always an option and this, in conjunction with employees seeking higher salaries to meet their own increased living costs, is creating a significant strain on businesses.

The results have been as stark as they are alarming.

Insolvency Service statistics show the number of registered company insolvencies in November was 2,029, 21 per cent higher than the same month in 2021 and 35 per cent higher than pre-pandemic levels in 2019.

Creditors’ Voluntary Liquidations were also up seven per cent on last year and 50 per cent from 2019.

There were, on average, 7,801 Individual Voluntary Arrangements (IVAs) registered per month in the three-month period ending November 2022, which is 11% higher than the three-month period ending November 2021, and 14% higher than the corresponding period in 2019.  IVA numbers have ranged from around 6,300 to 7,800 per month over the past year.

In addition to the spike in insolvencies, businesses will feel the squeeze. Now faced with unrealistic energy costs, it will be some time before they receive the support the government has pledged. Despite the concerning figures, steps can be taken to mitigate the immediate risk faced by smaller businesses.

At Higgs LLP, we are supporting our clients by offering free financial health checks and providing commercial restructuring advice, where necessary, in order to put their businesses on a firmer footing in 2023.

For further information, contact Lauren Hartigan-Pritchard by email on: Lauren.H-Pritchard@higgsllp.co.uk or by phone on 01384 327 208.