The number of businesses entering an insolvency process in the face of the current economic turmoil is continuing to rise, amid a perfect storm of creditors pursuing unpaid debts and directors closing their companies voluntarily before they are forced to do so.
This is according to the Midlands branch of insolvency and restructuring body R3 and follows latest statistics published by the Government’s Insolvency Service which show that corporate insolvencies in England and Wales increased by 21.1% in November to a total of 2,029 compared to November 2021’s figure of 1,676, and by 34.8% compared to November 2019’s total of 1,505.
R3 Midlands chair Eddie Williams, a partner at PwC in the East Midlands, said: “The rise in corporate insolvency numbers has been driven predominantly by an increase in Compulsory Liquidations, while Creditor Voluntary Liquidations and Administration numbers have also increased.
“What we’re seeing here is a combination of creditors taking legal action to recoup unpaid debts and directors opting to close their businesses – either before this choice is taken away from them or because they have had enough of their situation.
“For nearly three years, companies have been battered by the pandemic, rising costs, reduced spending and spiralling inflation. Many business owners will now be looking to the Christmas and post-Christmas periods to generate critical income. However, given how stretched consumer finances are this year, it remains to be seen whether this will be a happy Christmas or a final one for these firms.
“R3’s message to anyone worried about the survival of their business is to seek advice as early as possible. While it’s incredibly hard to voice financial fears, having that conversation with a qualified advisor as soon as problems arise could lead to better outcomes than waiting until they become more severe.
“Most R3 members will give an hour’s free consultation to potential clients to help them understand more about their situation and to outline the possible options for resolving it.”
