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Business Insolvencies Still Substantially Higher Than Pre-Pandemic

Business insolvencies remain at worryingly high levels and North East firms may yet feel the fallout of recent economic shocks.

Analysis of the latest corporate insolvencies figures by the North East arm of restructuring trade body R3 shows that while there has been a month-on-month drop of almost a third between March and April – the 1,685 cases seen last month are still 82% higher than the same time last year. R3’s Chris Ferguson said that a year’s worth of interest rises are still to be felt and could mean a year in which regional companies could take one step forward and one step back.

Mr Ferguson, who is head of recovery and insolvency at Gosforth-based RMT Accountants & Business Advisors, said: “Despite the monthly fall in corporate insolvency figures, total numbers are still above pre-pandemic levels, with the key reason for this being that Creditors’ Voluntary Liquidations are higher than they were in 2019. After three years of extremely challenging trading conditions, alongside a very volatile economic backdrop, it’s clear that many directors feel that they are no longer able to continue to trade their businesses.

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“Businesses right across the supply chain are desperately trying to balance increasing costs without the need to pass these increases onto their customers and, with inflation remaining stubbornly high, that balance is unlikely to be sustainable. We are also waiting to see the real impact of rising interest rates – and may not see the cumulative impact of the rate rises until later in the year as fixed term credit arrangements come to an end.

“Businesses could potentially face a credit cost shock just as inflation is predicted to ease, and could mean we’re looking at a one-step

forward, one-step back situation, rather than a sustained improvement in the trading climate.”

Meanwhile, the Insolvency Services statistics showed personal insolvencies across England and Wales also showed a month-on-month fall last month, dropping by 21.4% to 9,996 in April – also an 8.9% fall on last year’s total and down 7.1% on pre-pandemic levels.

Mr Ferguson added: “The fall in the personal insolvency figures needs to be viewed with some caution as they will reflect a changing debt solutions market where options for individuals might not be as readily available as they were previously. With money worries remaining a key concern for many people across England and Wales, and the challenges that businesses are also facing, North East company directors should remain ready to act if they see any signs their business might be distressed.

“Seeking advice regarding financial difficulties is far from an easy conversation to have, but helps to clearly set out potential options

that are available, and the earlier it happens, the greater the prospects are of delivering a successful restructuring solution.”


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