As new figures show a sharp rise in the number of company insolvencies, firms are being urged to beware the risk of ‘overtrading’ as lockdown measures ease.
The latest figures from the government’s Insolvency Service show there were 992 company insolvencies in March – up 45% on the previous month though 20% lower than in March last year. The rise comes after 11 months of relatively low levels of company insolvencies, as Government support has provided a vital lifeline for many businesses.
Allan Cadman, North West chair of R3, the insolvency and restructuring trade body, says: “As lockdown restrictions continue to unwind, there are reasons to be optimistic. Many businesses have adapted and reinvented themselves during the pandemic and may be in a better position for the coming months as a result.
“We may also see consumer spending increase, but companies need to be aware of the risks of over-trading if they don’t have the cashflow needed to cover the full costs of reopening and restocking. They need to plan for a sustainable reopening of their businesses.”
Allan, who is also a partner at insolvency firm Poppleton & Appleby, said companies should take advantage of continuing support while it lasts: “The Government’s recent decision to extend a number of its temporary insolvency measures provides a window for any business whose finances have been affected by the pandemic to plan for the future and explore how they can improve their situation. We would also urge anyone worried about their business finances to seek advice about their options from a qualified source.”
