• Sat. Mar 2nd, 2024

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R3 North East chair Chris FergusonR3 North East chair Chris Ferguson

It’s impossible to say whether the Christmas trading period will provide a badly needed boost for struggling North East firms or whether it’ll be the final blow for their finances.

That’s the view of the North East chair of insolvency and restructuring trade body R3, Chris Ferguson, after the latest Insolvency Service statistics revealed a month-on-month increase of more than 17 per cent, from 1,969 cases in September to 2,315 cases last month.

The October figure was almost two-thirds higher than the number of cases in the same month last year (1,410), and when compared to the equivalent month in the last pre-pandemic year, the latest monthly figures were more than 56 per cent higher than they were in October 2019 (1,509).

The figures also showed that Creditors’ Voluntary Liquidations, a procedure initiated by directors of insolvent firms to close their companies, and Administrations were at the highest levels seen in any October since before the pandemic.

Chris Ferguson, who is a director and head of recovery & insolvency at Gosforth-based RMT Accountants & Business Advisors, says: “Firms have been battling economic issues for three and a half years now, and corporate insolvency numbers are rising as more and more directors run out of options.

“The numbers of Creditors’ Voluntary Liquidations and Administrations are a reflection of the tough trading climate and director fatigue remains an issue among businesses in England and Wales.

“Businesses are being battered from all sides. Costs have increased, wage demands are still an ongoing challenge and consumers are spending less.

“If the Christmas trading period doesn’t bring the boost many businesses rely on, we will see insolvencies continue to rise in the new year.

“In this climate, it’s critical that directors are alert to the signs of financial distress, and act as soon as they identify any issues within their business.  Being unable to pay invoices as they fall due, HMRC arrears and debt demands or threats of enforcement are all signs of business distress that need to be carefully managed and dealt with as early as possible.”

Personal insolvencies across England and Wales increased by more than 35 per cent in October 2023, rising from 7,280 in September to 9,881 last month.

Chris Ferguson continues: “Despite the fact that personal insolvencies are below pre-pandemic levels, household finances remain tightly squeezed.  Food inflation may have fallen, but prices remain higher than they were a year ago which, coupled with the cost of fuel and energy, provides an enduring strain on personal finances.

“Combined with concerns about the economy, rising prices mean people are cutting their spending back and looking for every opportunity to save money. This is likely to increase at this time of the year, as people save for Christmas and to make sure they can cover their heating and food costs.

“We urge any North East company directors who are worried about their finances to seek advice as soon as possible, as voicing your concerns as early as possible, however hard that may be, will give you more options and more time to take a decision about your next steps.”