The North East chair of insolvency and restructuring trade body R3 is advising the region’s bosses to be ready to act quickly to address any emerging financial problems in their businesses after a sharp month-on-month rise in the corporate insolvencies rate.
Chris Ferguson was speaking after the latest Insolvency Service statistics revealed a 5.5% month-on-month increase from the 1,832 cases of corporate insolvency registered across England and Wales in July 2021 up to the 1,933 cases lodged last month.
The August 2021 figure is 43.4% higher than the number for the same month last year (1,348), which was in turn already 41.6% higher than the number for August 2019.
The latest increase in corporate insolvencies has been driven by a significant rise in the number of Creditor Voluntary Liquidations (CVLs), a procedure initiated by directors of insolvent firms to close their companies.
And Chris Ferguson, who is head of recovery & insolvency at Gosforth-based RMT Accountants & Business Advisors, is now advising the directors of struggling North East firms to take proactive steps to tackle any emerging financial difficulties.
He says: “These figures are a sobering reminder to both businesses and the government of the scale of the challenge facing the UK economy as we head into the winter months, and reflect the continued toll the sustained economic turbulence is taking on companies across England and Wales.
“The monthly increase in corporate insolvencies, to the third highest set of monthly statistics since January 2019, has mainly been caused by an increase in the number of Creditors’ Voluntary Liquidations.
“This suggests that directors do not consider that they are able to continue to trade in the current climate, and are choosing to close their businesses instead of pursuing alternative turnaround solutions.
“Even taking recent government support measures into account, North East firms are facing enormous running cost hikes just as household spending is facing its biggest squeeze in several decades, which delivers yet another blow to business owners who are still trying to recover from the impact to their businesses from the pandemic.
“It is clear that rising supply and energy costs, and the effect these have on margins, are of paramount concern to directors and management teams across the region.
“Accepting that your business needs help can be difficult but acting swiftly to address problems gives access to a much wider range of potential turnaround solutions.”