Business insolvencies on rise as directors ‘run out of options’
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Business insolvencies rose by 18% in October compared to the previous month, driven by a rise in the number of directors choosing to close their companies voluntarily.
According to a leading North West insolvency expert, the figures reflect the tough trading climate and the level of ‘director fatigue’.
The latest government figures show there were 2,315 business insolvencies in October in England and Wales, which was also 18% higher than October last year and 57% higher than October 2019 before the pandemic. Of the total number, 1,889 were creditors’ voluntary liquidations.
Fran Henshaw, North West chair of R3 and Head of Corporate Recovery and Insolvency at Beever and Struthers, said: “Firms have been battling economic issues for three and a half years now, and corporate insolvency numbers are rising as more and more directors run out of options. The latest figures show that creditors’ voluntary liquidations and administrations are at the highest levels we’ve seen in October in more than four years, which reflects the tough trading climate and the level of director fatigue among the business community.
“Businesses are being battered from all sides. Costs have increased, as have wage demands, and people are spending less as they look to save ahead of the winter and to make sure they have enough left to cover the basics. If the Christmas trading period doesn’t bring a wave of new income, we could see insolvencies continue to rise in the new year, and at the moment, it’s impossible to predict whether this will be a badly needed boost or the final blow for struggling firms.
“In these kinds of circumstances, it’s critical that directors are alert to the signs of financial distress, and act if any of them present themselves. Cashflow problems, stock piling up and issues paying rent, taxes or suppliers are all signs that a business is distressed and need to be acted upon without delay before they get any worse – and while the business has as wide a range of potential solutions open to it as possible.”