The increasing economic impact of the pandemic has been laid bare by the number of corporate insolvencies across England and Wales in April being more than double the figure for the same month last year.
That’s the view of Chris Ferguson, North East chair of insolvency and restructuring trade body R3, after the latest Insolvency Service statistics revealed that there was a 115.2% year-on-year increase from the 925 cases of corporate insolvency registered in April 2021 up to the 2,114 cases lodged last month.
The increase follows the phasing out at the start of April of the remaining elements of Government rules brought in to protect companies in pandemic-related financial distress from creditor action, although some new measures were introduced in their place to give struggling firms a degree of continuing financial support.
And Chris Ferguson, who is head of recovery & insolvency at Gosforth-based RMT Accountants & Business Advisors, is now advising directors of struggling regional firms to take advantage of whatever time and opportunities they have to get qualified advice about how they can resolve their businesses’ financial and operational challenges.
From 1 April, companies could once again face a winding-up petition for debts of £750, after temporary legislation which had raised set the winding-up petition threshold to £10,000 expired.
Restrictions preventing commercial landlords from issuing winding-up petitions against limited companies for unpaid rent during the pandemic also expired at the same time.
Chris Ferguson says: “The year-on-year doubling in corporate insolvencies highlights the key role the Government’s support initiatives played in preventing the economic damage of the pandemic from translating into an increase in corporate insolvencies.
“High levels of Creditor Voluntary Liquidations, a procedure initiated by directors of insolvent firms to close their companies, also suggests that large numbers of them lack confidence in their ability to continue trading in the current climate, and are choosing to close their businesses now rather than being forced to in the future.
“The new figures also clearly reflect the continued toll the economic turbulence is taking on the business community, especially as the boom many were hoping for when pandemic restrictions ended simply hasn’t happened as the UK has moved from one damaging set of economic stressors to another without any time to draw breath.
“Businesses are trying to trade amidst rising inflation and a contracting economy, while consumer confidence is lower than during the peak of the pandemic due to significant cost of living concerns.
“Alongside this, rising fuel and energy costs and demands for increased wages from employees mean that it’s a challenge for businesses simply to break even at the moment, especially for those who are still reeling from the pandemic.
“Our advice to any directors who are worried about their business is to seek advice as soon as possible. We know how hard it is to admit a business you’ve worked to build is struggling, but having an early conversation is more likely to result in a better outcome than waiting until the problem has spiralled.”