More local businesses are at risk of going bust next year due to a high level of firms in distress and pent-up demand in insolvencies being filed.
McTear Williams & Wood which has been tracking the number of companies in distress against the number filing for insolvencies, found that the gap between the two has risen significantly in recent years. This suggests a pent-up demand in firms filing for insolvency and could see higher numbers going out of business in the coming 12 months as a result.
The Norwich firm, which provides insolvency and business rescue services, has been using its own index - with a base line of 100 - to track the financial situation of the region's firms since the start of 2008. Until 2020, the amount of companies in distress has roughly stayed in-line with the number of insolvencies filed - the final three months of 2019 saw an index of firms in distress at 201 and the index of local insolvencies at 112. During the last two years however the gap has sharply widened. The most up to date figures shows that during the spring of 2011 the index of firms in distress at 214 - its joint-highest level since record began - and insolvencies at 101.
Since then, although figures on businesses in distress are not available, the first three months of 2022 has an insolvency index of 163. "Logically the increase in the number of companies in distress is likely to lead to an increase in corporate insolvencies on a lag", said Andrew McTear, director of McTear Williams & Wood. "Corporate insolvencies were incredibly low during the pandemic because of unprecedented government support for businesses, temporary restrictions on winding up petitions and businesses simply waiting to see how things turned out". Not only are struggling businesses contending with the ending of government support but this year's inflation and falling consumer confidence will also have an effect and could lead to insolvencies across the UK doubling. "High inflation is a game changer," Mr McTear added. "Businesses are all suffering higher costs but some don't have the pricing power to pass those costs on. Corporate insolvencies are rising and likely to continue to. If the UK goes ito a recession corporate insolvencies will at least double.
What to do if your business is financially struggling
Andrew McTear from insolvency and business rescue specialists McTear Williams and Woods provides his top 10 tips on what to do if your business is struggling.
Eastern Daily Press
31 October 2022