The festive trading period could yet become the final blow for struggling North East firms’ finances after the region saw a spike in insolvencies, specialists say.
The chair of North East insolvency and restructuring trade body R3, Chris Ferguson, said it was too hard to call if the Christmas period and so called ‘Golden Quarter’ will provide enough of a boost for thousands of beleaguered businesses. His views come as latest Insolvency Service statistics show a month-on-month increase of more than 17%, from 1,969 cases in September to 2,315 cases last month.
The October figure was also almost two-thirds higher than the number of cases in the same month last year – 1,410 – and was 56% higher when compared to the equivalent month in 2019, the last pre-pandemic year. The figures also showed that administrations and creditors’ voluntary liquidations – in which directors of insolvent firms close their companies – were at their highest levels seen in any October since before the pandemic. Meanwhile, personal insolvencies across England and Wales increased by more than 35% in October, rising from 7,280 in September to 9,881 last month.
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Mr Ferguson, who is a director and head of recovery & insolvency at Gosforth-based RMT Accountants & Business Advisors, said: “Firms have been battling economic issues for three and a half years now, and corporate insolvency numbers are rising as more and more directors run out of options.
“The numbers of creditors’ voluntary liquidations and administrations are a reflection of the tough trading climate and director fatigue remains an issue among businesses in England and Wales. Businesses are being battered from all sides. Costs have increased, wage demands are still an ongoing challenge and consumers are spending less.
“If the Christmas trading period doesn’t bring the boost many businesses rely on, we will see insolvencies continue to rise in the new year. In this climate, it’s critical that directors are alert to the signs of financial distress, and act as soon as they identify any issues within their business. Being unable to pay invoices as they fall due, HMRC arrears and debt demands or threats of enforcement are all signs of business distress that need to be carefully managed and dealt with as early as possible.
“Despite the fact that personal insolvencies are below pre-pandemic levels, household finances remain tightly squeezed. Food inflation may have fallen, but prices remain higher than they were a year ago which, coupled with the cost of fuel and energy, provides an enduring strain on personal finances.
“Combined with concerns about the economy, rising prices mean people are cutting their spending back and looking for every opportunity to save money. This is likely to increase at this time of the year, as people save for Christmas and to make sure they can cover their heating and food costs.”
North East companies including Faraday Printed Circuits and pub operator Milton Portfolio Property have gone into administration in recent weeks. Data released last month from recovery specialist Begbies Traynor suggested the North East has seen a recent 25% hike in companies battling insolvency issues, with construction, property, retailers and support service businesses struggling the most.
