Member Article

Triple Challenge Facing North East Firms As Tide Turns On Corporate Insolvency Figures

North East business owners trying to get their operations back up to full speed as the economy reopens are potentially facing a triple challenge to achieving their goals.

That’s the view of Alexandra Withers, North East chair of insolvency and restructuring trade body R3, who was speaking after the publication of the official corporate insolvency figures for England and Wales for the first quarter of 2021.

There were 2,384 corporate insolvencies reported during the period, which represents a 21.9% reduction from the final quarter of last year and a 38.3% fall from the number of the first three months of 2020.

But despite the range of government business support measures that remain in place, the downward trend observed since the onset of the pandemic turned upward towards the end of the quarter, with a 45% month-on-month rise between February (685 cases) and March (992 cases).

And Alexandra Withers, who is an associate solicitor in the insolvency department of Short Richardson & Forth Solicitors in Newcastle, is advising regional business owners to be preparing now for managing their finances and operations once the support mechanisms are no longer available.

She says: “The first three months of 2021 have been tough for many North East businesses, and followed a year of shutdowns, re-openings, false starts, ambiguity and confusion.

“While the quarterly fall in corporate insolvencies represents the lowest quarterly total on record, the increase between February and March suggests numbers may now finally be on the rise, as was always likely to be the case in the end.

“It’s clear that Government support measures are still helping to keep many North East businesses going, but they are only delaying rather than preventing the financial pain of the pandemic from leading to a sharp, sustained increase in corporate insolvencies.

“As Covid restrictions lift and we begin to return to some degree of normality, regional businesses will face three key challenges, with the first being the need to keep a careful eye on their cashflow levels to ensure they don’t fall into the trap of over-trading and risk facing insolvency through cashflow or creditor problems.

“They must make sure they have a plan for a sustainable reopening, so they don’t undo their efforts to survive the last year by mismanaging the next couple of months, and they also need to think about how they will manage when the Government support measures end.

“Feedback from R3 members suggests that many company directors seem to have delayed planning for this inevitability, and they really must prioritise using the time remaining before the majority of the measures end in June and furlough is wound up in September to ensure they have a viable plan in place for the final quarter of this year and beyond.

“Anyone who is worried about their business’s finances should seek advice from a qualified source as soon as they become concerned. Doing so will give them more options to turn their financial situation around, and more time to decide what the best approach for their business will be.”

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