Business Insolvencies and Energy Prices
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Business Insolvencies and Energy prices
Business insolvencies have reached their highest quarterly level since July to September 2009, in the second quarter of 2022 according to the Office for National Statistics (ONS).
This is further compounded by the fact that 10% of UK businesses have reported a risk of insolvency in August 2022. A large proportion of businesses cited the increase in energy prices as their main concern. The rise in insolvencies reflects the trend of increasing energy prices, additional debts companies have been saddled with since the pandemic, and increasing costs in raw materials.
Which industries had the highest number of business insolvencies?
Over half of the business insolvencies accounted for in England and Wales in the first half of 2022 were from a handful of key industries; Manufacturing, accommodation, and food service activities, construction, and wholesale and retail trade industries.
The construction industry registered the highest number of insolvencies, and this can be attributed to the rise in energy prices pushing up the cost of raw materials to an unsustainable level, alongside the increase in gas use in the industry the report concludes.
Wholesale and retail trade was also hit particularly hard accounting for 14% of total company insolvencies in the second quarter of 2022. According to the ONS data, this was driven by the industry’s high use of gas and in turn the energy price increases.
What are businesses doing to counteract the rises?
As a result, many businesses are considering raising prices to counteract the situation. Despite short-term Government support through the Energy Bill Relief Scheme the pressures on businesses are unlikely to change anytime soon.
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