Fewer companies went bust in May than the previous month, amid a pick-up in business activity across England and Wales, according to official data.

Company insolvencies fell 6% month-on-month to 2,006, which is 21% lower than in May 2023, the Insolvency Service said.

The number of firms going out of business rose steadily during 2021 and 2022, with 2023 seeing the highest annual number of company insolvencies since 1993.

Experts said the fall last month reflects better trading conditions for businesses than the end of last year, when the UK went into a small recession.

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.”

After a positive start to the year, economic growth remained flat in April, according to the Office for National Statistics, which could yet cause problems for some companies.

The figures showed that construction businesses made up the highest percentage of companies going insolvent in the 12 months to April, at 18%, or 4,401 firms.

The number of total company insolvencies also remains higher than those seen both during the Covid-19 pandemic and between 2014 and 2019.

David Hudson, partner at consultant FRP, said: “Insolvency levels appear to be stabilising, however many businesses still find themselves in a perilous state of limbo.

“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.”

The figures are for companies in England and Wales, with Scottish and Northern Irish firms counted separately.