North East Connected

Rise In Creditor Actions And Business Liquidations Lead To Year-On-Year Doubling Of Corporate Insolvencies

A rise in creditor actions against struggling firms and increasing numbers of company directors choosing to close down their businesses are the key factors behind the number of corporate insolvencies recorded across England and Wales more than doubling in comparison to this time last year.

That’s the view of Alexandra Withers, North East chair of insolvency and restructuring trade body R3, after the latest Insolvency Service statistics revealed that there was a 105.8% year-on-year increase from the 758 cases of corporate insolvency registered in January 2021 up to the 1,508 cases lodged last month.

The January figure also represented a 4.8 per cent month-on-month rise from the 1,488 cases of corporate insolvencies reported in December.

The increase in creditor actions follows on from the start of the phase-out of government rules brought in to protect companies in pandemic-related financial distress from creditor action, which began in October last year and which is scheduled to be complete by the start of April.

Alexandra Withers, who is an associate director at insolvency litigation financing company Manolete Partners plc in Newcastle, is advising company directors to take steps to address any financial issues they think they may be facing as soon as possible to give themselves the best possible chance of resolving them.

She says: “Compulsory liquidations are now 131.4% higher than this time last year, which would suggest that creditors are now starting to take action over unpaid debt – and with the final pandemic protections due to disappear in just a couple of months, it’s reasonable to expect that this trend will continue.

“Numbers of Creditors’ Voluntary Liquidations have remained similar to the heightened levels recorded this time last month, which also indicates that a significant number of company directors are choosing to close their businesses rather than attempting to carry on trading in the current climate.

“They’ve battled against myriad factors in recent months including new Covid measures, a slowdown in consumer spending and rising inflation, with steep increases in fuel and energy prices proving a particular pinch-point.

“After nearly two years of trading through a pandemic, these factors may increasingly become too difficult for many directors to deal with, especially for businesses operating in sectors where the start of the new year is always the most challenging trading period.

“Talking about your financial concerns can be incredibly tough, but doing so as early as possible will give you more potential options, more time to take a decision, and a greater chance of improving your situation than if you wait until it worsens.”

Exit mobile version