The Insolvency Service data revealed that 2,552 companies were declared insolvent, mostly through creditors’ voluntary liquidations. Compulsory liquidations also spiked by 34%, partially due to tax authorities’ increased efforts to recover funds from tax-defaulting firms.

Insolvency numbers dipped during the pandemic, owing to an £80 billion business loan scheme and a temporary hold on court-ordered liquidations. However, the numbers have rebounded, hitting a 13-year peak in Q4 2022 and remaining high into Q1 2023.

David Kelly, head of insolvency at PwC, said: “The 2,552 insolvencies is the highest monthly number we’ve seen this year so far and, given that trading conditions remain extremely challenging, the number will likely continue to climb through the second half of the year.

“In addition, rising interest rates have been a blow to struggling businesses, with the potential for more pain when the Bank of England meets next week to decide the base rate. For small businesses in particular, these higher rates make it increasingly difficult to take on and finance debt, with many having to use their emergency cash reserves to do so, thus intensifying liquidity issues.

David Kelly

“As such, we’re seeing an uptick in the number of firms needing debt restructuring services and looking at ways to compromise their existing on and off balance sheet liabilities.”

The construction and retail sectors have been hit hardest, and trouble among food manufacturers is escalating. Nearly all liquidations involved firms with yearly sales below £1 million. Notably, 42 construction firms have entered administration, including Howard Russell Construction, a significant industry player with a turnover exceeding £40m in the year ending March 2022.

Helen Wheeler-Jones, director in PwC’s restructuring practice, added: “Corresponding with the rise in compulsory liquidations – a 34% jump on the same month last year – there were also 348 winding up petitions in May, down on the month before but significantly higher than the 246 we saw in May 2022.

“Unfortunately, it’s likely that winding up petitions will continue to rise as uncertainty in the economy persists. Creditors are feeling nervous and acting sooner to recover debts than perhaps they would have done in previous years where the better economic conditions would have prompted leniency.

“The hardest hit sectors continue to be construction and retail, with increasing pressure in food manufacturing where they are getting squeezed from both ends.”