The chair of the Midlands branch of insolvency and restructuring trade body R3 is urging directors of the region’s businesses to seek advice if they are worried about their businesses, as corporate insolvency figures continue to soar compared to this time last year.
Figures published by the government’s Insolvency Service show that the number of companies entering insolvency decreased by 3.2% in February to a total of 1,515 compared to January’s total of 1,565. However, administrations increased to a 15-month high and overall levels of corporate insolvencies increased by 121.2% compared to February 2021’s figure of 685.
R3 Midlands chair Eddie Williams, a partner at PwC in the East Midlands, said: “The increase in administrations suggests that there are several insolvent businesses which still have some prospect of rescue, given this is one of the main statutory purposes of the administration process.
“Wherever possible, the insolvency profession will work to secure the rescue of businesses in administration to help ensure better outcomes for the company, its staff and its creditors.
“It is notable, however, that despite the month-on month-decline in corporate insolvencies, the Insolvency Service statistics show a marked year-on-year increase and highlight that corporate insolvency has returned to its higher pre-pandemic levels. The February figure of 1,515 is 12.6% higher than in February 2020, when corporate insolvencies totalled 1,346.
“It is evident that the ending of the peak of the pandemic and the lifting of the final set of restrictions has not led to the shot in the arm the business community had hoped for. Although the economy grew in January and firms benefited from restrictions ending in February, it took time for footfall to increase, and it will take a while before anything resembling normality returns.
“Consumer spending has declined and, here in the Midlands, consumer confidence is low as people are concerned about the economy and their own financial position. Inflation is now a real problem for local firms and individuals alike. This situation is unlikely to improve anytime soon given the impact current geopolitical events will have on energy costs.
“In addition to this, the restrictions on using winding-up petitions are coming to an end later this month – something which could see an increase in creditors turning to legal action to recover unpaid debts.
“Now is the time for directors to be alert to the signs of financial distress and to take the necessary action. We know conversations about finances are some of the hardest to have but speaking up about concerns at an early stage typically leads to a better outcome than holding back until the problem worsens.”
