A sharp year-on-year rise in the number of UK corporate insolvencies should act as a wake-up call for North East owner/managers to ensure their businesses are as prepared as possible to withstand any financial problems that hit their clients, suppliers, creditors or themselves.
Andrew Haslam, North East chair of insolvency and restructuring trade body R3, has issued the advice after the latest quarterly statistics from the Insolvency Service showed an 11.9% year-on-year increase in the number of businesses in England and Wales entering insolvency.
There were 4,321 company insolvencies between April and June 2019, compared to 3,861 during the corresponding three months last year.
The new figures also show a 2.6% rise in corporate insolvencies between the first and second quarters of 2019 – and with a range of challenges facing the UK economy through the remainder of the year, Andrew Haslam is advising business owners to maintain tight control and oversight of their companies’ finances.
Andrew Haslam, who is also head of specialist business advisory firm FRP Advisory LLP’s Newcastle office, says: “These figures are evidence of a difficult period for UK businesses and simply put, it’s an uncertain, difficult time to be in business right now.
“Tighter constraints on consumers and significant uncertainty about the future of the UK economy and the UK’s relationship with the EU are just some of the key factors at play that are making the business climate a challenging one.
“Questions around what Brexit really means have hit investment and growth levels, and led to a degree of economic stagnation.
“In addition to this, consumer confidence is low, as people worry about the weeks, months and even years ahead. This may mean consumers are only buying what they need.”
Recent research by R3 found that North East businesses in five of the 11 sectors it monitors have a greater proportion of companies with a higher than normal risk of entering insolvency in the next 12 months than the national averages for their respective industries.
Andrew Haslam continues: “Businesses in a variety of industries are struggling right now. Retailers are suffering as the world in which they operate changes, and more and more people shop online. Manufacturing output and confidence is low. Private and business car sales are down. And businesses which stockpiled items ahead of the original Brexit deadline of 29 March will now be seeing those decisions have an impact on their cash flow levels.
“Research done by R3 last year found that one in four UK companies had taken a financial hit following the insolvency of a supplier, customer or debtor in the previous six months, which clearly illustrates the reach and impact of how the ‘domino effect’ of one struggling business can affect the fortunes of others.
“It also shows how important it is for business owners to maintain the widest possible view of the factors that could potentially impact on their operations, even if they are out of their direct control.
“Any company directors who are concerned about their business or the market conditions it is operating in should seek advice from a knowledgeable and qualified professional source. The earlier they do, the more options they will have for helping their company recover and start to thrive again.”