The second highest quarterly figures in a decade for corporate insolvencies in England and Wales are a sign of the serious financial challenges to come for North East businesses.
That’s the view of Chris Ferguson, North East chair of insolvency and restructuring trade body R3, after new data revealed a 40% year-on-year increase on the number of corporate insolvencies for the third quarter of 2022 (5,645) compared to the same period last year (3,987).
The latest Insolvency Service statistics show that there 5,595 corporate insolvency cases lodged across England and Wales between July and September this year, a figure which is marginally lower than the 5,629 cases in the preceding three months.
The new Q3 figure also represent a 27.9% per cent rise from the same quarter in 2019 (4,375 cases), which represents the last comparable pre-pandemic period.
The statistics also show that the number of firms put into liquidation through Creditors’ Voluntary Liquidations (CVLs), a procedure initiated by directors of insolvent firms to close their companies, was the highest Q3 figure recorded for a decade and close to the highest figure seen since 1960.
Compulsory liquidations are also now at the highest level since before the pandemic.
Chris Ferguson, who is head of recovery & insolvency at Gosforth-based RMT Accountants & Business Advisors, says: “Government support paused, rather than prevented the economic effects of the pandemic from leading to more businesses entering insolvency processes, but now that support has ended, we’re starting to see numbers exceed pre-pandemic levels.
“Although the latest figures show a quarterly fall in corporate insolvencies, which has been driven mainly by a reduction in Creditors’ Voluntary Liquidations and administrations, as well as the summer bringing the traditional slowdown in inquiries and appointments, they are still the second highest quarterly figures for corporate insolvencies in a decade.
“Despite the quarterly fall in Creditors’ Voluntary Liquidations, figures for this process are higher than this time last year, the highest we’ve seen in Q3 for 10 years and close to the highest figure we’ve seen since 1960.
“The cause seems to be a perfect storm of directors running out of road and creditors now being able to pursue unpaid debts after the temporary legislation preventing this ended in the summer.
“As tough as conditions are now for many North East companies, it seems inevitable that corporate insolvency numbers will increase further in the coming months as economic conditions, increased costs and the impact of the cost of living crisis on disposable income deal further blows to businesses that have struggled since the beginning of the pandemic.
“Regional business owners who find themselves in financial difficulty should seek early advice from a qualified professional. The earlier advice is taken, the wider the range of options available to businesses to support an appropriate turnaround strategy.”