Last month, company insolvencies reached their highest level since March 2020, and experts predict that more firms will go bust as some Government protections from creditors came to an end.
Some 1,446 firms in England and Wales went out of business last month – a 7.2% increase on the previous month.
From 1 October, Government-imposed restrictions on statutory demands came to an end. However, the Government extended restrictions on winding-up petitions related to commercial rent until 31 March 2022 to protect companies from aggressive creditor enforcement.
Unfortunately, Government support was just one factor affecting the number of insolvencies.
Sky-rocketing natural gas prices lead to the collapse of several high-profile energy companies, including Utility Point and People’s Energy.
The HGV driver shortage forced other companies out of business, including chilled food delivery business EVCL Chill.
The Insolvency Service said that September’s insolvency figures were 56% higher than a year ago, when there were 928 insolvencies in September 2020.
Many companies that brought on additional finance to ride out the pandemic are also now at increased risk of insolvency.
The Bank of England recently reported that one-third of the UK’s small businesses are ‘highly indebted’ with debt levels more than ten times their cash balances. This compares to just 14% of companies that had very high levels of debt before Covid-19.
Nicky Fisher, deputy vice-president of insolvency trade body R3, said that many industries are struggling with the current economic situation.
“Consumers are now increasingly cautious about the state of the economy, their personal finances and the increased cost of living and are more wary about spending their money.
“And with widespread supply chain disruption and significant wholesale energy price increases building up between September and October, there is likely to be little slack in the system for businesses and individuals who have yet to get back on their feet following the impact of Covid.”
Tom Fox, Licensed Insolvency Practitioner at Umbrella Insolvency, said: “The national recovery from coronavirus still looks fragile and it’s important that the Government has kept a financial safety net in place for some companies. However, it’s important that indebted businesses start making plans to repay debt now, otherwise March 2022 could bring a tidal wave of insolvencies.
“As always, the earlier you take professional business debt advice, the more options you’ll have to rescue your company.”
For more information about company insolvency solutions, speak to a member of the team today. Call: 0800 611 8888.