Manufacturing insolvencies rise 63 per cent with industry facing soaring bills

UK manufacturing sector insolvencies increased 63 per cent in the last year, as firms suffered from issues including COVID-19, pandemic-related debts, Brexit trade restrictions and shortages of labour and raw materials. The number of insolvencies in the manufacturing sector increased from 893 in 2020-21 to 1,454 this year, with more companies also likely to have entered voluntary liquidation.

The new Insolvency Service figures, analysed by advisory firm Mazars LLP, come with many firms in the sector facing the prospect of closure due to soaring energy bills this autumn. Many companies will see their fixed-price arrangements with energy providers renegotiated in October and, amid the ongoing turmoil in the energy market, are facing huge increases.

Unlike domestic consumers, who have energy bills capped by Ofgem, companies do not have an energy price cap rate and manufacturing firms, which are typically highly energy-intensive, could see their energy bills increase by 300 per cent to 400 per cent when fixed-price arrangements are renegotiated in the autumn.

With rising interest rates also exacerbating the debt piles that companies accrued during the COVID-19 pandemic, groups representing the UK manufacturing industry have warned that thousands face closure over the coming months unless the government provides more support, raising the prospect of the insolvency rate skyrocketing further still over the next year.

Manufacturing lobby group Make UK has been among those to call on the government to provide further support to the sector to help businesses navigate rising costs and avoid falling into insolvency or entering voluntary liquidation.

Commenting on the latest figures, Mazars partner Julien Irving said: “The level of inflation we’re seeing at the moment can be lethal for manufacturers, especially energy costs. Many are unavoidably energy-intensive and such steep rises in energy prices can have a crippling effect on their ability to operate, especially if that cost cannot be passed on to their customers.”

Irving added: “Rising interest rates are also making it harder for businesses to keep up with the spiralling costs of their debts.”


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