Member Article

R3 North East comments on official monthly corporate insolvency statistics

Commenting on the official Insolvency Service figures for January showing a 39.1% month-on-month fall in the number of UK corporate insolvencies, Alexandra Withers, North East chair of insolvency and restructuring trade body R3, said: “January’s fall in corporate insolvency numbers don’t reflect the fact that the economic fallout from the pandemic is continuing to hit businesses, individuals, and the wider economy.

“It’s clear the Government’s support packages, which were extended once again in December, are helping prevent the rise in insolvency numbers we would have expected to see in an economic climate like this one.

“However, the support packages and bans on creditor enforcement actions can’t last forever. We hope that the Chancellor will use his Budget on March 3rd to outline how they will be wound down in an orderly manner in the medium term, and how businesses, staff, and the self-employed will be supported during this period.

“Our members are telling us that many North East firms are hesitant to make plans with conditions liable to change at any moment, so clarity around the future of the support schemes will help directors with their planning for the rest of the year.

“The debt burden which UK companies, and most especially SMEs, have built up is also a concern, as it will drag down the investment which will be a vital component of the economic recovery from the recession.

“Many firms are still struggling – and those who usually rely on a strong pre-Christmas trading period will have suffered as the third lockdown meant people couldn’t shop as they usually would.

“It’s possible that a number of businesses entered an insolvency procedure ahead of the December rent quarter day, which would help to explain why corporate insolvencies, and more specifically administrations and Creditors Voluntary Liquidations, increased then and fell again in January.

“The new restructuring tools introduced by the Government provide a fresh range of options for companies in distress, but to make the most of them it’s more important than ever that business leaders seek advice as early as possible.

“Many R3 members will give an hour’s free consultation to clients to discuss their situation and the challenges they face, and to look at the potential options for turning the situation around.”

This was posted in Bdaily's Members' News section by Julian Christopher .