Fewer businesses went bankrupt in May, indicating signs of an improving economy ahead of the Bank of England’s interest rate decision later this week.
Insolvencies dropped by 6% last month when compared to April, with around 2,000 companies disappearing, data from the government revealed.
May’s figures represent a 21% drop year-on-year, the Insolvency Service added.
Following the culmination of the pandemic, insolvencies have consistently edged higher before they peaked in 2023 when the number of companies going bust reached its highest number since 1993.
Improved trading conditions, boosted spending due to wage increases, and easing inflation are believed to be the key drivers.
Benjamin Wiles, managing director at data company Kroll, said: “Compared to this time last year, we are seeing a pickup in business activity with key indicators showing improving consumer and business confidence.
“While I think it’s fair to say that we aren’t quite out of the woods, compared to twelve months ago when businesses were managing unpredictable cost inflation and energy bills, it does feel there’s now a lot more certainty for companies to plan.”
David Hudson at consultancy firm FRP believes that while insolvency rates begin to stabilise, many businesses are hovering in a state of limbo, hoping to hold on until conditions improve.
He said: “Economic growth has stagnated after a positive couple of months while many investment decisions remain on pause as we await predicted interest rate cuts and the outcome of the General Election – a particular risk in sectors like construction where purdah can stall planning decisions.”