The Midlands branch of the insolvency and restructuring trade body R3 is calling on the Government for greater clarity over how struggling businesses, staff, and the self-employed will be helped when pandemic support packages and bans on creditor enforcement actions are withdrawn later this year.
The plea comes as monthly statistics issued by the Insolvency Service show that corporate insolvencies in England and Wales decreased by 39.1% to 752 in January 2021, compared to the previous month’s figure of 1,235.
R3 believes the numbers mask the true state of the economy and indicate an inevitable and imminent sharp hike in company failures when Government business support winds down and the economy recalibrates.
R3 Midlands Chair Eddie Williams, a partner at PwC in the region, said: “These latest insolvency statistics do not reflect the damage the pandemic has done to businesses and the economy, and it’s clear that when the Government withdraws its support packages and bans on creditor enforcement actions, we will see a surge in firms who are struggling.
“We therefore urge the Chancellor to use his Budget on March 3rd to give a clear outline of how these measures will be phased out in an orderly manner over the medium term, and how businesses, staff and the self-employed will be supported during this period.”
The effects of current economic conditions are highlighted by feedback from R3 members, which reveals that companies are hesitant to make plans for the year ahead with conditions liable to change at any moment.
A further concern for businesses is the debt burden which UK companies, especially SMEs, have built up, and its negative effect on the investment required to build economic recovery.
Eddie Williams continued: “Despite the enormous challenges facing so many businesses and the need for increased economic certainty, there are still some positives to be seized. For example, restructuring tools introduced by the Government last year provide a fresh range of recovery options for companies in distress. To make the most of them, however, it’s crucial for business leaders to seek professional advice as early as possible.
“Most R3 members will give an hour’s free consultation to clients to discuss and assess the potential options for turning their situation around.”