Have a think back to 2009. Where were you? How old were you? Had you, at that time, yet dreamed of a glorious career in the insolvency and restructuring sector? Two years before the world had been bingeing on cheap credit for a number of years, 'subprime' became an adjective very few had used and Lehman Brothers was still a bank, rather than the portent it would become.
Then, in 2008, the 'great financial crash' came, putting previous financial crises and currency collapses to shame. When the bubble burst, financial institutions were left holding trillions of dollars worth of near-worthless investments in subprime mortgages. Our glorious profession in the UK became very busy the year after ...
... and all of this when you were 15, right? Still holding dreams of being an F1 driver or owning your own stables? We offer all of the above because, in the second quarter of this year, England and Wales saw the most company insolvencies since 2009, Government figures showed on Friday 28 July. The Insolvency Service reported that 6,342 companies were registered as insolvent in the three months to the end of June, 13 per cent more than a year earlier and the highest since the second quarter of 2009.
As has been widely reported, insolvencies slumped in Britain during the COVID-19 pandemic, as businesses benefited from £80 billion of Government-backed loans and a ban on Compulsory Liquidations, which only fully ended last April. Many small businesses have struggled to repay these loans, and also face challenges from much higher Bank of England interest rates - which hit a 15-year high of 5 per cent in June - as well as a big rise in energy bills and staffing costs.
Creditors' Voluntary Liquidations rose to the highest since records began in 1960, at 5,240, but despite this the Bank of England, in familiar territory of not appearing to have a clue, said it expected Britain's corporate sector to be "broadly resilient" in the face of higher interest rates and weak growth, with problems concentrated among very small firms with relatively little debt.
David Kelly, head of insolvency at PwC disagrees; he thinks that there will be a boom in larger companies going to the wall before 2023 is out. What he says makes sense: "Like homeowners coming off fixed mortgage rates, many businesses have yet to refinance their debt, meaning the full impact of higher interest rates may yet to be felt." The numbers seem to back him up; so far in 2023, 157 businesses with annual revenue of over 10 million pounds have been declared insolvent.