Higher borrowing costs have been hurting companies, the Insolvency Service has said

The number of bankruptcy declarations in England and Wales reached the highest level in over a year last month, as soaring interest rates weighed on companies’ budgets, according to a report by the UK’s Insolvency Service on Friday.

According to the data, 2,361 companies went out of business last month in a 17% surge compared to the same month last year. It was the highest number since May 2023, and the joint third-highest on record going back to 2000, the report said. 

Construction was the worst-affected industry following a dip in the housing market, with 1,700 companies having entered bankruptcy between January and May 2024, data showed.

The trade industry, including the retail and wholesale sectors, as well as accommodation and food services, restaurants and bars, have been affected by a decline in consumer demand and saw around 3,000 companies file for bankruptcy in the reported period.    

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“High borrowing costs and wage growth are still very much a concern to business owners,” Mark Supperstone, managing partner at ReSolve, a business advisory and restructuring firm, told Bloomberg.

Interest rates at levels not seen in the UK for over a decade are pushing the cost of borrowing up, alongside high inflation, weak consumer confidence, and rising operating costs, having a heavy toll on company balance sheets, experts say.

“A drop in interest rates is now perhaps unlikely to take place until later this year, although there is still hope of a reduction in August,” Supperstone noted.

Business insolvencies in the UK have been on the rise since the removal of support measures that the British government put in place during Covid-19, and are now well above levels registered before the pandemic, the report said.