The economic damage caused by the pandemic is now starting to be reflected in levels of corporate insolvency after the latest significant quarterly rise in the number of corporate insolvencies across England and Wales.
That’s the view of Alexandra Withers, North East chair of insolvency and restructuring trade body R3, after new official figures for the third quarter of 2021 revealed an increase of more than 16% on the number of corporate insolvencies during the second quarter of the year.
The new Insolvency Service statistics show that there 3,765 corporate insolvency cases lodged between July and September this year, compared to 3,226 in the preceding three months.
The new Q3 figure also represents a 43.5% per cent year-on-year rise from the same quarter in 2020.
The statistics also show that the number of firms being put into liquidation by their directors through Creditors’ Voluntary Liquidations (CVLs) was the highest quarterly figure recorded for more than a decade.
Alexandra Withers, who is an associate solicitor in the insolvency department of Short Richardson & Forth Solicitors in Newcastle, is advising North East business owners who think they might be facing financial difficulties to take proactive steps to address them as quickly as possible.
She says: “With the number of corporate insolvencies from July to September being the highest quarterly figure since the pandemic began, it is clear that the economic damage done by Covid-19 is now being reflected in levels of insolvency.
“The highest quarterly total of Creditors’ Voluntary Liquidations since 2009 suggests that company directors are choosing to close their businesses after trading for more than a year and half during a pandemic after deeming future success unlikely in the current economic climate.
“Over the last three months, businesses have faced a perfect storm of rising energy prices, labour market and supply chain issues, as well as the winding down and withdrawal of the Government’s business support measures.
“In addition to this, consumer spending and confidence declined over the late summer and early autumn as people worried about their finances and the future of the economy, and cut back on their spending as a result.
“The winter months can place extra pressure on the finances of businesses in many sectors at the best of times, let alone in the present circumstances.
“Directors need to stay alert for any signs that their business might be distressed, such as cashflow issues, problems paying staff or suppliers and increasing stock levels, and should seek advice as soon as any of them present themselves, or if they become worried about their business and its finances.”