Property company insolvencies soar

The number of UK property companies falling into insolvency has soared in the past few months. In the first three months of the year, 81 property investment companies fell into insolvency, according to tax and advisory firm Mazars. That is the highest quarterly figure in more than a decade and a sharp increase on the 46 companies which became insolvent in the final three months of 2021. Investors that were weakened by the pandemic now face being killed off by rising interest rates. Among the most at-risk businesses are those which took on loans to fund speculative development projects before the pandemic struck and commercial landlords who lost out on income when shops were closed during lockdowns. Now they face an existential threat in the form of rising borrowing costs, as the Bank of England moves to rein in soaring inflation by raising interest rates. “With so much rent still in arrears and creditors increasingly coming knocking, the recent series of interest rate rises could not have come at a worse time. Unfortunately, further rises are likely to follow – which means the sector is likely to see further insolvencies,” said Rebecca Dacre, a partner at Mazars. Some businesses have survived until now only because borrowers have been protected by government coronavirus measures. But a moratorium on issuing winding up petitions came to an end earlier this year, meaning lenders are no longer obliged to show forbearance. Separate research by accountancy firm Price Bailey shows a sharp jump in the number of businesses in the construction sector which have defaulted on government loans designed to prop up small businesses during the pandemic. The FT (£)