Ailing North East businesses urged to act now amid peaking liquidations

A leading restructuring expert is urging businesses struggling to meet financial repayments to seek help before the cash runs out, following the release of the latest Official Government insolvency statistics for June 2022.

Kerry Pearson is a Restructuring and Insolvency Partner at Azets in the North East, one of the UK’s largest regional accounting firm. Kerry believes new restructuring procedures introduced under the Corporate Insolvency and Governance Act 2020 (CIGA 2020) can present much better outcomes amid a growing number of liquidations.

Kerry Pearson said: “Government insolvency statistics published over the past six months show liquidations peaking and almost no company voluntary arrangements (CVAs) – and very few administrations. This is not good as liquidations are an end-of-life process.

“Most at-risk are businesses that are extensively geared or have fixed rate deals coming to an end, with protective covid measures being withdrawn coupled with the increased cost-of-living and ongoing supply chain issues slowing economic recovery. It’s also apparent the investor community is becoming more cautious.”

Insolvency statistics for June 2022 show 1,691 registered company insolvencies, 40 per cent higher than June 2021 (1,207) and 15 per cent higher than pre-pandemic levels (1,467 in June 2019).

There were 1,456 Creditors’ Voluntary Liquidations (CVLs), 30 per cent higher than in June 2021 and 44 per cent higher than June 2019. There were 3.6 times as many compulsory liquidations in June 2022 as in June 2021.

Kerry says companies on LIBOR plus interest rates have been immediately impacted by the Bank of England’s latest interest rates hike to 1.25 per cent but says more companies and jobs can be saved if business leaders act early.

She said: “The impact of rising interest rates on UK businesses is going to be seismic, with liquidations already peaking before the Bank of England raised interest rates to 1.25 per cent and a likelihood they will keep rising.

“The challenges facing businesses are significant and whilst nobody can magic away what’s coming, more businesses and jobs can be saved using these new procedures.

“It is incumbent on business leaders to consult as early as possible, and on advisors to use the new procedures as imaginatively as possible, preserving value and keeping people in jobs that might otherwise be in jeopardy.”

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