Member Article

'Jury Out' On Whether Christmas Trading Will Soothe North East Businesses' Insolvency Fears

A North East insolvency expert believes ‘the jury is still out’ on whether the Christmas period will lead to the traditional boost many North East businesses are hoping for.

Chris Ferguson, North East chair of insolvency and restructuring trade body R3, was speaking after the latest Insolvency Service statistics revealed a 15.7% month-on-month increase from the 1,684 cases of corporate insolvency registered across England and Wales in September up to the 1,948 cases lodged last month.

The October 2022 figure is also well over a third (38.2%) higher than the number for the same month last year (1,410), and 31.9% higher than the number for October 2019 (1,477).

Chris Ferguson, who is head of recovery & insolvency at Gosforth-based RMT Accountants & Business Advisors, says: “The run-up to Christmas is often the most important part of the trading year for many North East businesses, especially those in the retail and hospitality sectors, that can tip the balance between a good and bad trading year.

“Although we are now entering the busy festive season, with the added bonus of a men’s World Cup, the jury is still very much out on whether the pre-Christmas trading period will lead to the traditional boom many businesses need.

“Money worries continue to be front of mind for many people as the costs of food, fuel and energy continue to rise and real wages fall. Many people aren’t sure how expensive their energy bills will be this year and are likely be reluctant to spend money they feel they may otherwise need to cover rising living costs.

“Business owners themselves will also be worried about the economic conditions that are affecting their particular sector. The prospect of an imminent and prolonged recession will raise the challenge of how they will meet rising costs, including increasing employee pay expectations as well as covering their own living expenses.”

Personal insolvencies across England and Wales also showed a month-on-month increase, rising by 4.9% to 10,514 in October compared to 10,023 in September, and were 8.6% higher than October 2021’s figure of 9,682.

Chris Ferguson continues: “A likely prolonged period of economic challenges, the end of temporary insolvency legislation, and a lack of a post-covid bounce have hit many parts of the economy and the supply chain hard, and have resulted this year in an increasing number of company directors choosing to close their businesses, while more creditors are taking enforcement action to collect debts as a means of balancing their own books.

“We would urge any business owners who are worried about their financial situation to seek advice as early as possible. There are a wide range of turnaround and restructuring tools available to businesses in need of support, but early intervention is absolutely key.”

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