Rising costs and ongoing economic and political uncertainty are continuing to drive corporate insolvencies upward, while an increasing number of local entrepreneurs are seeking insolvency and restructuring advice and considering the future of their businesses.
This is according to the Midlands branch of the UK’s insolvency and restructuring trade body R3 and comes on the back of latest figures from the Insolvency Service which show that corporate insolvencies in England and Wales increased by 2.9% last month [April] to a total of 2,053 and by 13.2% compared to April 2023’s figure of 1,813.
R3 Midlands chair Stephen Rome, a partner at law firm Penningtons Manches Cooper in the region, said: “April’s corporate insolvency figures were the highest we have seen since July 2024, with Creditors’ Voluntary Liquidations remaining the process companies most commonly enter into.
“Their consistently high numbers reflect the ongoing challenges, high costs and political and economic uncertainty Midlands businesses face, as well as the toll these are taking on their finances and their confidence in their ability to turn their situation around.
“Compulsory liquidations have also hit their highest level in more than five years as creditors chase down unpaid debts in an attempt to meet their own payment deadlines, led by the HMRC as the Government attempts to balance the national books.
“April saw the introduction of the new rates for Employers’ National Insurance Contributions and Minimum Wage, which have increased overheads for local businesses at an already challenging time. Many companies will already have increased prices and cut expenditure to cope with the existing economic challenges and many, especially SMEs, will find it increasingly difficult to respond to further cost increases.
“It is unlikely that we will see the full impact this will have on Midlands businesses until later in the year, but the prospect of these changes being introduced has influenced an increasing number of directors’ decisions to seek insolvency and restructuring advice and consider the future of their businesses.
“The recent rise in unemployment indicates that the tax increases, along with the prospect of the Employment Rights Bill coming into law, has also affected hiring levels and investment as management teams wait to see how it will impact on their wage bills. We expect this to continue until the picture is clearer.
“Alongside this, Midlands businesses have faced the impact of the introduction of the US tariffs. While some of the outcomes from the US President and Prime Minister’s recent announcement will be a relief to businesses in a range of sectors, a number of the details of the tariffs still need to be confirmed, and there is no denying their introduction will make it more expensive for local companies to export to America.
“The uncertainty and unpredictability around US tariff policy generally is also likely to affect costs, growth and investment as both business owners and lenders will look at how the tariffs will affect revenue and profits and may choose to change their plans, or review or withdraw their funding once these have been considered.
“Looking across the local economy, the sectoral picture is a mixed one. Construction continues to be affected by ongoing issues with the price of materials, payment and client hesitancy about commissioning new work, while the care sector is trying to navigate the Government’s proposals to end overseas recruitment for social care visas.
“On a more positive note, Midlands retailers have benefited from the late Easter and improved weather, which has led to an increase in sales, and hospitality has also seen a rise in activity and spending levels. However, there is no escaping the fact that all of these sectors will be seriously affected by the changes to National Insurance and Minimum Wage, which will put a further squeeze on margins and increase costs, and could lead to more businesses becoming financially distressed.
“R3’s message to anyone worried about the finances of their business is to seek professional advice as soon as concerns arise. It can be an incredibly hard conversation to have, but timely discussions with a qualified advisor may provide more options than waiting until a problem becomes more severe.
“Most R3 members will give prospective clients a free initial consultation so they can learn more about the issues they face and outline the potential options to resolve them.”
