A year-on-year rise in the number of insolvencies in. January show it has been an unhappy New Year for businesses, according to a leading North West insolvency expert.
The latest government figures show that there were 1,671 company insolvencies in January – 15% lower than December but 7% higher than in January last year and 11% higher than in January 2020 before the pandemic.
Allan Cadman, who is North West chair of the insolvency and restructuring trade body R3, said the rise was driven by an increase in the number of Creditors’ Voluntary Liquidations, a process where directors close their company voluntarily. “Directors are still turning to this process to close down their businesses as trading conditions and creditor pressures remain tough – and many are taking this step before the choice is taken away from them,” he said.
Allan, who is also an insolvency practitioner with the Xeinadin Group, added: “It’s been an unhappy New Year for businesses in England and Wales. The cost-of-living crisis and ongoing economic issues have meant the traditional new year spike in sales hasn’t happened, and we’ve seen a number of household names enter an insolvency process over the last month in an attempt to resolve their financial issues.
“As household disposable income contracts and pay lags behind inflation, many people are cautious about how and where they spend their money and are looking to make cuts in essential and non-essential spending.
“This is a further blow for businesses who are looking to get back on their feet after a torrid three years and are now caught in a pincer movement of rising costs and falling income.
“Our advice to directors, managers and owners is to be alert to the symptoms of business distress and to seek advice from a qualified source if they spot signs their firm is struggling.
“If they can see stock levels increasing, cashflow becoming a problem, or are struggling to pay rent, bills, taxes or staff, that’s the time to seek advice – and doing so as early as possible will give them more potential solutions and potentially a better outcome than if they’d waited until the problem became more severe.”
