Companies set to collapse under strain of rent and tax wage debt, insolvency experts predict
- Credit: Archant
East Anglian insolvency professionals are bracing themselves for a steep spike in firms going bust – possibly as early as October.
A member survey by insolvency and restructuring trade body R3 Eastern showed an overwhelming majority (93.7%) expect corporate insolvency to rise over the next year.
Nearly six in 10 (56%) predict the increase will occur between October and December 2020.
MORE – Region’s desperate tourism fightback begins with bid to coax back visitorsMore than half (56.1%) of those surveyed said they expected corporate insolvency numbers would be significantly higher in 2020 than in 2019, while 37.6% thought they would be somewhat higher.
The main triggers for firms seeking insolvency advice over the next 12 months would be rent payments or arrears (61.7%), trade debts (49.7%), tax payments or arrears (48.1%), and wage payments (35.5%), they said.
But R3 Eastern chairman Alistair Bacon, of AMB Law in Ipswich, pointed out that despite lockdown and continuing economic turmoil, corporate insolvencies actually decreased in previous months because of government support.
“R3 members reported that, during April and May, the enquiries they received were mainly around advice on companies’ eligibility for the state-provided relief packages, rather than for formal insolvency support,” he said.
“This is in no small part due to the government’s support measures, which have helped a number of businesses which would otherwise have struggled due to the pandemic.
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“It’s clear from the survey results, however, that it’s a question of when, not if, corporate insolvency numbers increase. The support available to businesses has deferred, rather than deterred, the rise in corporate insolvencies expected in our current economic climate.
“We would urge anyone who is concerned about the future of their business to seek advice as early as possible. Doing so will give them more options about their next step and allow them to make a more considered decision about how they move forward.”