A significant proportion of struggling North East business owners are working to get over their financial challenges with the support of understanding creditors, according to feedback from the members of insolvency and restructuring trade body R3’s North East committee.

In addition, the committee’s feedback is suggesting that, while its members are currently receiving a high number of enquiries about different insolvency procedures, the number of insolvency actions resulting against North East businesses is lower than might have been expected.

The chief factor for this is a lack of pressure being applied by both secured creditors, including HMRC, and unsecured creditors, like businesses in the supply chain that are awaiting payment on overdue invoices.

R3’s North East chair, Alexandra Withers, is recommending that any business owners who think they might be facing problems in the coming months keep their creditors and suppliers onside by communicating clearly with them about their situations, so that they know when they might expect payment on what’s owing.

And she is also advising those who think they may not be able to meet their creditor obligations in the foreseeable future to get qualified advice as soon as possible on their options.

Alexandra Withers, who is an associate director at insolvency litigation financing company Manolete Partners plc in Newcastle, says: “Feedback from our North East members suggests that we’re not yet seeing the significant rise in business insolvencies which might have been expected when the government rules brought in to protect companies in pandemic-related financial distress from creditor action began to be phased out in October.

“But what we’re seeing in practice here is a willingness from many creditors to work with businesses that owe them money, so that they have more of a chance to get their operations fully up to speed once again and trade sustainably in the longer term.

The most recent official business insolvency figures for England and Wales showed another substantial year-on-year increase, with a 63.6% year-on-year rise recorded from the 864 cases registered in October last year up to the 1,405 cases lodged last month.

Alexandra Withers continues: “Landlords cannot yet launch insolvency proceedings relating to any commercial rental payments they are owed, but as things stand, this situation will change at the beginning of April and that may be the signal for a further surge in business insolvency cases.

“The rise of the Omicron variant and the uncertain economic impact that it is going to have through the winter months is another factor to consider, especially for industries like hospitality, leisure and retail which have been desperate to make up for revenues that they’d lost through the year.

“Communicating clearly with business creditors about any financial challenges is absolutely essential if struggling firms want to retain their confidence, especially if they are suppliers who could threaten your capacity to operate by cutting off access to the products you need to fulfil customer orders.

“Businesses who seek advice early often have more options open to them, more time to make a decision about their next steps, and a better chance of securing a favourable outcome, and it’s often the case that support measures can be put in place which don’t require a business to actually go into insolvency.”