Company insolvencies reach record levels

Directors urged to seek advice promptly if financial difficulties loom.

The number of insolvent businesses in England and Wales has risen by over a third to hit a four-year high, with company directors impacted heavily by a mixture of long-term economic issues, director fatigue and creditor pressure.

This is according to the Eastern branch of insolvency and restructuring body R3 and follows statistics published by the Insolvency Service which show that corporate insolvencies rose by 34 per cent in August to 2,308 compared to July’s total of 1,827 and by 19 per cent in comparison with August 2022.

Creditors pursue monies owed
R3 Eastern Chair Hayley Watson, associate director at East Anglian business rescue and insolvency practive McTear Williams & Wood said: “August’s corporate insolvency figures were the highest in four years, with financial issues driving increasing numbers of companies to enter an insolvency process or, simply, to throw in the towel and shut their doors.

“The consistently high number of Creditors’ Voluntary Liquidations highlight the fact that more directors are choosing to wind down their firms, while compulsory liquidation figures hit a four-year high this August as creditors continue to pursue monies owed. “Here in East Anglia, as across the whole of the UK, businesses are being bombarded with economic blows, all of which are having an effect on the bottom line. Cost inflation has been a problem for some time and while this is expected to ease it is still sitting higher than many predicted. As a result of this, there is continuing upward pressure on pay while recruitment is a challenge and people are still cautios about spending money on anything other than the essentials.”

Positive glimmer
As far as the future is concerned however there may be a glimmer of something position ahead. A late summer increase in the number of start-up businesses in East Anglia as well as indications of improving cashflow could give the region’s economy a much needed boost heading into the final quarter of 2023. This is according to R3 Eastern’s analyses of data from business intelligence provider Creditsafe which show a month-on-month rise of 1.23 per cent in the number of businesses set up in East Anglia in August – a 7 percent increase on the same month last year. Over the same time period the quantity of debts owed by liquidated firms in the region fell by a sizeable 37 per cent compared to the previous month.

August also saw a marginal fall in the number of East Anglian companies with late creditor payments on their books, a figure which has decreased steadily since March of this year.

Hayley Watson continued: “This research reveals some positive news for East Anglia, with an indiciation of growing business confidence. We should remain tentative, however, in how we view these figtures in the context of a hugely challenging economic backdrop. Inflation, higher wage and utility bills, plus the rising cost of borrowing are but a few of the factors impacting heavily on the profitability of local businesses as they fight hard to survive and thrive.

Signs of distress
“R3 Eastern’s message to directors therefore is simple: be alert to signs your business could be financial distressed and seek advice as soon as they show themselves. If you’re having problems paying wages, staff or suppliers, if stock is starting to pile up, or if you’re worried about your business and its financies, that’s the time to speak to a qualified advisor. Most R3 members will give an hour’s free consultation to potential clients to enable them to understand more about the circumstances of the business and to outline the options available to help them improve their situation.”

Hayley Watson added: “Rescue is always my professional’s top priority in the work that we do and East Anglian businesses should know that our restructuring community is better placed than ever to support all in financial difficulty.”

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