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Energy Bill Increases Could Force Many More UK Companies into Liquidation

By Jon Munnery
31 August 2022

The scale of energy price increases set to be introduced in the coming months could force many more UK companies into liquidation.

Recent weeks have seen a growing number of company directors taking their businesses into liquidation and that trend is expected to continue as costs increase across the British economy.

Small businesses are expected to be particularly badly impacted by energy price rises, with recent reports suggesting that huge numbers of SMEs are now unlikely to survive beyond the coming winter.

The national chair of the Federation of Small Businesses (FSB) Martin McTague has said that many of his members are deeply pessimistic about their prospects for the short and medium-term future.

“Many of our members say the eye-watering energy bills could be the final nail in the coffin as they struggle to get through winter,” he said.

“Unlike large corporates, small firms cannot hedge costs and negotiate deals with their large energy suppliers.”

Representative organisations like the FSB are calling on the government and the incoming prime minister to take swift action to help provide some much-needed support to small firms whose bills are rising more steeply than they can afford.

Their concerns are generally that unless support can be provided on a massive scale then thousands of businesses could be forced to close down and potentially enter liquidation.

Reflecting on some of these issues recently, Shevaun Haviland from the British Chambers of Commerce said: “At over 10 per cent, CPI inflation is at a 40-year high, interest rates are seeing the largest increase in 27 years, and eye watering energy bills have created a perfect storm of increasing costs. 

“The impact of these challenges on consumers, businesses and wider society cannot be overstated.”

Official figures released at the beginning of August showed that corporate insolvency rates in England and Wales were at their highest levels for a decade during the second quarter of this year.

During that same period, the number of Creditors’ Voluntary Liquidations (CVLs) increased very sharply, with more and more company directors deciding to take their struggling businesses into liquidation voluntarily.

Directors are advised to seek out expert guidance sooner rather than later if they think that entering liquidation could be the best option for their company.

Jonathan Munnery
Insolvency & Restructuring Expert
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