The British economy faces an encouraging development: the number of companies that closed last year was the highest in three decades.

More than 25,000 companies filed for insolvency in 2023, the most since 1993, according to government data released this week. As pandemic-related business support measures end, the debris from years of high debt and interest rates, rising prices and the cost of living crisis is becoming clearer. Insolvencies have spread from small to larger companies, analysts said.

Brighter economic times await businesses still facing relatively high costs, higher wage demands, supply chain uncertainties and faltering consumer confidence. Slower inflation, stronger growth and interest rate cuts are expected to come this year, but not anytime soon.

The Bank of England on Thursday kept interest rates at 5.25 percent, the highest since 2008, and where they have remained since August, after rising from just above zero in a series of increases over a year. and a half.

Officials said inflation had eased, including wage growth and services inflation, but some measures of persistence remained “elevated.” Two members of the nine-person rate-setting committee voted in favor of a quarter-point rate hike, while one voted for the first time in favor of cutting rates.

There has been good news on inflation, “but we need to be more confident that inflation will fall to the 2 percent target and stay there,” Andrew Bailey, the bank’s governor, said Thursday. “We are not yet at a point where we can lower interest rates.”

Inflation in Britain has fallen markedly from its peak above 11 percent in late 2022 to 4 percent in December. Some economists expect inflation to slow to 2 percent in the spring. But concerns about whether inflation will remain low mean investors expect the Bank of England to take longer to cut interest rates than the U.S. Federal Reserve and the European Central Bank.

The bank said it expected inflation to fall below its target in the second quarter before rising again in the second half of the year. The inflation rate would end the year around 2.7 percent and remain there until 2025, and would not reach the target again until the following year.

The bank predicted that the economy would continue stagnation in the second and third quarters of 2023, until the end of the year. The economy would grow just 0.25 percent in 2024, before accelerating slightly in 2025.

The effect of high rates is still working its way through the economy. Businesses that take out loans will experience higher financing costs, while households that must refinance their mortgages will face higher monthly payments than a couple of years ago.

According to consulting firm EY-Parthenon, rising interest rates were one of the reasons for an above-average number of profit warnings by public companies last year. Other factors were contract delays and cancellations, increased overhead costs and weak consumer confidence.

Last year, insolvencies hit retail and hospitality businesses especially hard, and 97 percent of those businesses were small businesses with revenues of less than 1 million pounds ($1.27 million), PwC said.

Jeff Cansdale closed his fish and chip shop in Reading, a town west of London, last week after seven years in business. At first, business wasn’t so bad during the pandemic because Cansdale offered takeout and was able to stay open, he said. The shop, a traditional chippy, also served some specialties such as vegan fish and poutine, the Canadian dish of chips, cheese curds and gravy.

but a government funded discount intended to encourage people to eat in restaurants was hurting their business. Cansdale recovered from that, Russia invaded Ukraine, and the shop’s essential costs (fish, oil, and energy) skyrocketed. As inflation squeezed family budgets, his regular customers came much less frequently and ordered less. Profits plummeted and did not recover.

“Over time, it just became unprofitable,” Cansdale said. “It meant that I was starting to accumulate debts that the company was not going to be able to pay.”

Economists at Oxford Economics said the rise in bankruptcies in many advanced economies, including Canada and the United States, was largely due to lower levels of insolvencies during the pandemic. But, they said in a research note this week, there was “no cause for panic” because many of the companies that failed were small, so their problems would not lead to increased unemployment or a risk to overall financial stability.

Still, there is concern. On Thursday, the British government said it was “reaffirming” its support for small businesses by updating information about the help they could receive and creating a business council to speak directly to government officials.

The owners of Fidget & Bob, a cafe and deli in Reading, are concerned about the number of businesses closing in the city. At least half a dozen delis, bars and other hospitality venues have already closed this year.

And small businesses, mostly independent, are what give personality to the town, he said. Shuet Han Tsui, co-owner of Fidget & Bob. “Reading does not have enough spaces to be able to lose a handful” in such a short time.

Ms. Han Tsui and her co-owner, Breege Brennan, said their business is doing well, but they are working hard to keep costs down. They have shortened their opening hours and encourage customers to place orders in advance. Even reducing the time it takes to place an order by 5 to 10 percent helps, Han Tsui said. To attract more customers, they are bringing in products they used to supply to local stores that recently closed.

“We just have to look to 2024 and hope that 2025 brings something brighter,” he said.