North East business owners with concerns about their firms’ financial futures should be taking advantage of a ‘window of opportunity’ to address them before it slams shut.
That’s the view of Alexandra Withers, North East chair of insolvency and restructuring trade body R3, after the latest official corporate insolvency statistics showed a nine per cent month-on-month fall.
According to the Insolvency Service, the number of corporate insolvencies across England and Wales dropped from 754 in January to 686 last month, and is almost half the level seen a year ago, when 1,348 corporate insolvencies were seen in February 2020, just before the pandemic gathered momentum.
The number of insolvencies is continuing to be held down due to the various government business support measures that are being kept in place until the UK economy is able to reopen properly, with the furlough scheme recently having been extended to the end of September and the ban on commercial evictions for non-payment of rent now running until the end of June.
With no guarantee that the support measures will be extended again, Alexandra Withers, who is an associate solicitor in the insolvency department of Short Richardson & Forth Solicitors in Newcastle, is advising business owners who are becoming concerned about their company finances to seek qualified advice while this extra level of support remains in place.
And she is also concerned on reports from R3’s North East members about business owners who appear unwilling to take immediate action to safeguard their operations because the immediate threat to them has been removed.
Alexandra Withers says: “Despite the fall in insolvencies, February continued to be tough for businesses, individuals and the economy across our region.
“The national lockdown meant people couldn’t prepare for and celebrate Christmas and New Year as they usually would, which meant an obvious hit during a crucial trading period for many businesses and had a significant impact on their chances of success or even their survival through the first quarter of 2021.
“Government support has been and continues to be a lifeline for many, but it has stemmed rather than stopped the flow of insolvencies we would expect to see in this kind of economic climate. In addition, the usual ‘trigger points’ for action, such as winding-up petitions or repossession notices, are currently out of the picture.
“For as long as the government support measures remain in place, there is a window of opportunity for company directors to take action which addresses any concerns they have about their financial situations, as it will be much easier to do so now while this extra safety net remains in place.
“Even if the support measures are extended again later in the year, they will have to come to an end at some point, and it’s concerning that some of our members are reporting that some company directors are putting off examining their options because the problem isn’t right in front of them right now.
“Now really is the time for them to make the most of the government’s extension of its support packages, and to be seeking advice about what needs to be done to stop potential problems, for which they’re not properly prepared, potentially overwhelming them later in the year.”