A month-on-month fall in the number of corporate insolvencies in England and Wales may not be a true reflection of the heavy toll the pandemic is taking on local businesses, warns the Midlands branch of insolvency and restructuring trade body R3.
Figures published by the government’s Insolvency Service show that, nationally, the number of companies entering insolvency fell by 11.4% in December 2021 to a total of 1,486 compared to the previous month, but R3’s Midlands Chair suggests that this statistic could be masking the true situation in the East Midlands.
Eddie Williams, who is also a partner at PwC in the region, said: “The national monthly fall in corporate insolvencies is likely not a true reflection of the levels of underlying distress locally. Many businesses that were already challenged at the start of the pandemic are now dealing with further disruption, such as staff shortages, inflationary pressures and concerns over rising energy prices.
“When a longer-term view of the national data is taken, however, it more accurately demonstrates what may be happening in the region. The latest monthly corporate insolvency statistic is a 20.1% increase on December 2020’s figure of 1,237, and 32.7% above the 1,120 figure for December 2019.
“These increases were driven by a rise in Creditors Voluntary Liquidations, which suggests that the economic situation has pushed – and continues to push – many company directors to close their businesses voluntarily before that decision is made for them.”
Eddie Williams notes that East Midlands businesses in sectors such as retail and hospitality have had a particularly challenging time over the past few weeks with the peak Christmas period being severely affected by COVID restrictions and staffing issues.
He continued: “A sharp rise in COVID cases, increasing costs and falling consumer confidence hit footfall, personnel and sales throughout December. Company directors and management teams have also had to work in the midst of COVID restrictions, which will have affected day-to-day operations, customer behaviour and revenue levels.
“With the latest COVID rules set to end within days, local business owners still need to remain alert, and if their business becomes financially distressed, they should seek advice as soon as possible.
“Most insolvency practitioners in the region will offer a free hour’s consultation to potential clients, so they can understand more about their business, its circumstances and outline what options might be available.”
