A rise in the number of business insolvencies is driven in part by an increase in winding up petitions, according to a leading North West insolvency expert.
The latest insolvency statistics show there were 1,679 corporate insolvencies in September – down by 13.5% on the previous month but 16% higher than in September last year and 11% higher than in September 2019.
Allan Cadman, who is North West chair of the insolvency and restructuring trade body R3, said the year-on-year increase had mainly been caused by a rise in Compulsory Liquidations, which was likely to be due to the end of restrictions on winding-up petitions at the end of March.
However over the past three years there had also been a significant increase in Creditors’ Voluntary Liquidations, a process in which directors close their company voluntarily.
He explained: “This is likely to be due to the triple whammy of the withdrawal of Covid support, the economic turbulence, and the challenging business climate resulting in directors feeling that they are unable to continue and choosing to close their businesses before that choice is taken away from them.
“Businesses have been operating against a backdrop of real uncertainty in recent weeks and months. A volatile pound, a decline in consumer confidence and lower household spending have led to weaker economic growth, and it seems likely that these conditions will get worse before they get better.
“With living costs rising, both business owners and employees are under significant financial strain as rising costs have meant rising salary demands and increasing pressure on margins, which some businesses haven’t, unfortunately, been able to meet.
“Sky-rocketing energy bills are also a major challenge. While the recently announced emergency support package will go some way towards mitigating these concerns, it may not provide enough of a safety net.”
Allan, who is also a partner at insolvency firm Poppleton & Appleby, urged businesses with debt problems to seek professional advice. “Discussing your concerns with a qualified professional as early as you can means you’ll have more time and options to resolve your situation. Most R3 members offer a free initial consultation to business owners so they can understand their situation and the options available to help them move forward.”
