Despite another big quarterly fall in the number of corporate insolvencies, North East business owners should still be continuing to prepare themselves for ‘trouble on the horizon’.

That’s the view of Alexandra Withers, North East chair of insolvency and restructuring trade body R3, who was speaking after the latest official corporate insolvency statistics for England and Wales for the third quarter of 2020 revealed a nine per cent drop compared to the previous three months.

The overall number of company insolvencies decreased from 2,974 in Q2 2020 to 2,672 in Q3, a number which is also 39% lower than the figure for the same three months last year.

And Alexandra Withers, who is an associate solicitor in the insolvency department of Short Richardson & Forth Solicitors in Newcastle, also believes that businesses can’t, in the present circumstance, be pinning too many hopes on the usual trading boost in the run-up to and over the coming Christmas period.

She says: “The Q3 corporate insolvency numbers are lower than even the figures seen in the previous quarter, after the first lockdown came into effect, and are another reminder that, whatever the impact so far of the pandemic on companies, it is yet to be fully seen in the insolvency statistics.

“The support that Government has provided to businesses, including offering a range of emergency loans, suspending winding-up orders and stopping commercial evictions, is clearly helping keep many companies afloat during this period of economic turbulence.

“Despite this, the third quarter of the financial year has been hard for the UK, its economy and its business community, and with the second English lockdown now upon us, there is clearly more trouble on the horizon.

“Five months of economic growth have failed to make up the ground lost by the unprecedented 19.5% economic contraction in April, with GDP remaining 9.2% lower than it was prior to the pandemic, and it remains to be seen whether the Chancellor’s Winter Economic Plan will reduce economic pain or only delay it.”

The latest figures from the Office for National Statistics found that 18% of UK businesses said they are at moderate to severe risk of insolvency, with 38% of companies in the hospitality sector saying the same thing.

Alexandra Withers continues: “Retailers, hospitality, manufacturing and the service sectors are all being hit, and while some of these have shown some signs of recovery, others are still not even close to where they were before Covid.

“The festive season is often the lynchpin of the year for many companies, especially in the retail and hospitality sectors, but there is real concern that this model will not work this year as it has in the past, especially with the closure of non-essential retail, limits on social gatherings and curbs on travel to see family and friends.

“Our members are telling us that they are receiving increasing numbers of requests for insolvency and restructuring advice and support, after a flurry of enquiries about advice on the Government’s support measures at the start of the pandemic.

“Despite the Government’s efforts, there are likely to be a significant number of directors of businesses who are in a worrying position because of Covid, many of whom would have little cause for concern if the pandemic hadn’t happened.

“We would urge anyone who is in this position to seek advice from a qualified, reputable source as soon as they see signs their business is starting to struggle. The sooner you seek advice, the more options you have to potentially resolve your situation and the more time you have to come to a considered decision about your future.”