The Top Five Industries Most at Risk of Insolvency 2022

Industries at risk of insolvency

It’s been a tough few years, the combined effects of the cost of living crisis, war in Ukraine, post-COVID blues and other factors combined, but which industries are looking most at risk?

It may come as a surprise but there are a number of industries that are at risk, simply by virtue of the way business is conducted. There’s a raft of companies having to declare insolvency due to the last few years of support tailing off and the pinch of costs building up and up.

Here are the top five most at-risk industries for insolvency at the moment, if you fall into these categories, it may be time to review your business plan and outgoings:

1. Business and personal services

Business and personal services is wide-ranging in nature and includes all businesses that supply services to a person or business.

The sheer breadth of this category possibly contributes to this category, however it remains one of the most unpredictable and changeable industries too. Pinpointing why is difficult as it could include any of the following reasons due to it covering so much, but it could be:

• Increasing costs when it comes to energy, travel, wages
• A pinch on outgoings from clients who are experiencing the same costs
• A lack of staff due to recruitment and retainment levels
• Restrictions due to Brexit and/or COVID

2. Building and construction

Never a smooth path, the ongoing plight of builders and subcontractors has been well-documented. Some key business risks in construction are:

• The need to pay for services and supplies before businesses can pay themselves. If a developer fails to pay builders who have made progress, extra money needs to be found to pay subcontractors.
• Paying certain subcontractors over others and giving priority to those working on more priority jobs.
• A high level of competition, leading to underquoting and reduced margins in order to win work. This then leads to less room for actual net profits.
• The circular nature of failure and failed companies. Certain companies overpromise and under-deliver.
• Rapid expansion or taking on a significant project with insufficient resources.
• Poor financial management and lack of record -keeping.

3. Accommodation and food services

When cost of living increases hit, this is an industry that traditionally takes a beating. Often because of:

• Extremely high wages and as a result, a candidate-driven market that often cannot be met in terms of expectations
• High rent or premises costs and associated increases.
• A high vulnerability to economic shifts and changing consumer trends and preferences.
• The never-changing competitive nature of the industry.
• High fit out costs for restaurants, of which style and trends can change on a whim. This means that certain venues get left behind very quickly and can suffer.

4. Retail trade insolvency

Retail seems to be an ever-diminishing trade for many, even big names are not surviving and the plight of the British High Street is well-documented. Risks here are similar to the catering and accommodation trade:

• Extremely high wages and premises costs combined with business rates.
• Increasingly lower cost of comparable products being sold online and an inability to compete.
• Digital disruption and the lack of any possibility of providing a comparable service/low cost.
• Vulnerability to economic shifts and changing consumer trends and preferences, including a decline in physical attendance in stores.
• The competitive nature of the industry.

5. Transport, postal & warehousing

This should be no surprise, with fuel costs becoming extortionate, but this is also exacerbated by:

• Lack of skilled and experienced staff and recruitment issues.
• Underquoting and reduced margins in order to win work: this leaves very little to no room for net profit.
• High overheads, including fuel, wages/subcontractors’ costs and premises costs.
• High capital investment, through the purchase of vehicles.
• Poor financial management and lack of record keeping.