North East business owners who are worried about meeting their end of year property rental payments should be speaking to their landlords before they slip into arrears.
That’s the advice of Chris Ferguson, North East chair of insolvency and restructuring trade body R3, ahead of the final Quarter Day of 2022, which this year falls on Christmas Day.
Quarter Days, which traditionally occur towards the end of March, June, September and December, are the dates on which commercial rental payments are traditionally due, and can provide a pressure point too far for businesses already struggling with long-term financial challenges.
Temporary legislation that prevented landlords from trying to recover rent arrears from tenants who weren’t able to operate as normal or at all during the pandemic came to an end in April this year, while the temporary winding-up petition threshold of £10,000 that the government also put in place went back to the usual £750 figure at the same time, making it easier for creditors to act to recover any arrears they are owed.
Chris Ferguson, who is head of recovery & insolvency at Gosforth-based RMT Accountants & Business Advisors, said: “Rent is typically one of the largest business expenses and many directors have found the amount they owe has increased where the pandemic has affected their ability to trade, especially those in industries that are yet to get fully back on their feet after the pandemic.
“Quarter Day costs always have the potential to have a substantial impact on businesses’ cashflow situations, but with everyone watching what they spend at the moment due to rising energy bills, fuel costs and food prices, there’s every chance that many North East firms will have even less room for manoeuvre in their cashflow forecasts than usual.”
The latest official Insolvency Service figures showed revealed a 15.7% month-on-month increase from the 1,684 cases of corporate insolvency registered across England and Wales in September up to the 1,948 cases lodged in October.
The October 2022 figure is also well over a third (38.2%) higher than the number for the same month last year (1,410), and 31.9% higher than the number for October 2019 (1,477).
Chris Ferguson continues: “The latest footfall figures showed improvements around the start of the month for city centres, high streets and retail parks across the UK, and having the festive season getting into full swing and the World Cup may still provide a boost for end-of-year trading figures in the retail and hospitality sectors.
“However, whether this will be enough to see everyone through the first quarter of the new year, which is traditionally the quietest part of the year for many in this sector, remains to be seen, and North East business owners who think they may be facing financial difficulty in the New Year should engage with their landlords as early as possible to make them aware of potential delay to rent payments.
“Most landlords would far rather see their tenants engage and discuss payment issues rather than face the risk of being left with void units if a business failed. Many will be willing to listen, negotiate or compromise with sitting tenants who are having short-term financial problems to support them during a difficult trading period.
“Any regional business owners who are concerned about their financial position should seek qualified advice as early as they can, so they can access the widest possible range of options for managing their particular situation.”