Warning thousands of businesses face collapse as cost of living crisis continues

24 January 2023 , 10:07

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There are fears that the amount of companies closing this year will increase, compared to last year (Image: Getty Images)

Business owners have been warned that thousands of firms face collapse this year as the cost of living crisis continues.

Last year, the number of companies on the brink jumped by more than a third, according to insolvency firm Begbies Traynor.

They expect this number to rise this year due to higher costs and consumers cutting back on spending.

Julie Palmer, partner at the firm, says they have been receiving an increasing number of calls from businesses owners, who are left concerned over whether they should carry on.

The firm says the number of companies in critical financial distress jumped by 36% in the last three months of 2022, reports the BBC.

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This is defined by if a company has more than £5,000 in country court judgments or a winding up petition against it.

Chef Mary-Ellen McTague was forced to close her restaurant in Manchester last year (Getty Images/iStockphoto)

The number of country court judgments served against companies in 2022 jumped by 52%, compared with 2021.

Julie says that up until now, low interest rates and loans had helped firms, while Covid loans and longer time to pay taxes during the pandemic also provided support.

However, she says there is "nothing" on the horizon in terms of what might replace them.

A backlog in the insolvency courts due to Covid has delayed some company collapses.

Julie said: "The courts were closed for business so nobody could take recovery action against non-payers and we are beginning to see those cases pushed through now."

These challenges have already proved lethal for some business owners, who admit that the pressures of keeping their businesses running feel like a "never-ending nightmare".

Britain recently cemented a new downgraded spot in the world's economic rankings after being overtaken by India.

The UK dropped from the fifth to sixth-biggest economy earlier than expected - and now won’t move for 15 years, according to the Centre for Economics and Business Research.

A year ago, Britain had only been expected to slip from fifth to sixth place in 2023.

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But it happened in 2021 instead, the consultancy’s World Economic League Table said.

The annual report now expects the UK position "to remain stable at sixth place over the next 15 years."

The report warns UK growth will no longer "exceed that in the rest of Europe" in the coming years.

Milica Cosic