Businesses in the South and Thames Valley are being urged to remain alert for signs of financial distress by R3, the trade body for restructuring and insolvency professionals.
The warning comes after the publication of December insolvency figures for England and Wales, and as COVID restrictions continue until the end of January.
The government statistics from The Insolvency Service revealed that corporate insolvencies fell compared to November 2021 but showed an increase on Decembers in 2020 and 2019.
The figures were:
- Corporate insolvencies fell by 11.4% in December 2021 to a total of 1,486 compared to November’s total of 1,678. They increased by 20.1% compared to December 2020’s figure of 1,237 and by 32.7% compared to 1,120 in December 2019.
- Personal insolvencies fell by 10.1% to 8,434 in December 2021 compared to 9,385 in November 2021, and were 12.4% lower than December 2020’s figure of 9,625.
Garry Lee, chair of R3’s Southern and Thames Valley region, said: “The monthly fall in corporate insolvencies has been driven by a reduction in all forms of corporate insolvency processes.
“However, the annual and two-yearly increases in corporate insolvencies have been driven by a rise in Creditors Voluntary Liquidations, which suggests that the economic situation is pushing many company directors to voluntarily close their businesses before that decision is made for them.”
Garry, who is an Associate Director in the recovery and restructuring services department at accountancy firm Smith & Williamson’s Southampton office, added: “With the latest COVID restrictions set to last until the end of this month, business owners in the South and Thames Valley need to remain alert.
“If the measures lead to their business becoming financially distressed, they need to seek advice as soon as this happens from a qualified and regulated advisor.
“Most insolvency practitioners will offer a free hour’s consultation to potential clients, so they can understand more about their business, its circumstances and outline what options might be open to it.”
December’s figures reflected a ‘tough end’ to a ‘torrid year’ for many businesses, according to R3.
Garry said: “Increasing COVID cases, rising costs and falling consumer confidence hit footfall and sales.
“Company directors and management teams also had to work in the midst of the new COVID restrictions, which will have affected day-to-day operation, customer behaviour and revenue levels.
“This is especially true in sectors like retail and hospitality, who normally have their busiest periods in December, but faced an unhappy Christmas this year.”
The monthly reduction in personal insolvency figures was driven by a reduction in all forms of personal insolvency process, while the annual fall can be attributed to a drop in bankruptcies and Individual Voluntary Arrangements.
Garry said: “Times are still tough for people in the South and Thames Valley.
“Many are worried about the future of the economy and their own personal finances, and are cautious about how they spend their money and what they spend it on.
“Inflation is also becoming a problem, with rising energy bills and increasing household costs squeezing people’s finances.
“We’re also seeing growth in demand for unsecured credit as people turn to credit cards and overdrafts to pay for Christmas or to help manage their finances.”
He added: “On the plus side employment is rising, but it remains to be seen whether wages will as well, as the economic effects of COVID continue to hit businesses.
“Our advice for anyone in the South and Thames Valley who is worried about their finances is simple: seek advice now.
“The earlier you do so, the more options you have available, and the more time you have to make a considered decision about which of the potential next steps is right for you.”