A month-on-month fall in the number of corporate insolvencies in England and Wales is not an accurate reflection of the current tough trading conditions, with rising interest rates likely to be another blow for struggling businesses later this year.
This is according to the Midlands branch of the UK’s insolvency and restructuring trade body R3 and comes on the back of figures published [16/5/23] by the Insolvency Service which show that corporate insolvencies decreased by 31.8% in April 2023 to a total of 1,685 compared to March’s total of 2,471, and by 15.2% compared to April 2022’s figure of 1,988.
Despite this, corporate insolvency levels increased by 82.2% from April 2021’s total of 925 and by 18.2% from pre-pandemic levels in April 2019 (1,426).
R3 Midlands chair Stephen Rome, director of law firm Thursfields in the region, said: “Despite the monthly fall in corporate insolvency figures, total numbers are still above pre-pandemic levels. The key reason for this is that Creditors’ Voluntary Liquidations are higher than they were in 2019.
“After three years of disturbed trading and a choppy economy, it’s clear that directors have simply had enough or have realised the time is right to shut down their companies while the choice is still theirs to make.
“The business climate is still tough. Firms right across the supply chain are trying to manage increased costs without passing this on to their customers, and with inflation remaining sticky, this is likely to become ever more challenging as the year progresses.
“We are also waiting to see the real impact of rising interest rates, and may not see their cumulative impact until later in the year when fixed term credit arrangements end. Potentially, businesses could face a credit cost shock just as inflation is predicted to ease, leading to a one step forward and two steps back situation, rather than a sustained improvement in the trading climate.
“Given the climate, it is crucial for business owners to be alert to the symptoms of corporate distress and to seek advice from a qualified source if there is any significant sign of trouble.
“Increasing stock levels, decreasing cashflow and struggles to pay rent, bills, taxes or staff all indicate that it’s time to seek appropriate support. Doing so as early as possible will give more potential solutions than acting only when the problem becomes more severe.”
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