East Anglian insolvencies ‘will rise steeply’, experts warn

Prime minister Boris Johnson and chancellor Rishi Sunak

East Anglian bosses are being urged to plan ahead to avoid an insolvency spike when prime minister Boris Johnson and chancellor Rishi Sunak withdraw government Covid support - Credit: PA

A sharp fall in company collapses masks the financial pain about to emerge from the pandemic, East Anglian insolvency experts are warning.

The East of England branch of insolvency and restructuring trade body R3 is urging company bosses to plan ahead for the withdrawal of government support schemes.

Ironically, the latest government figures for England and Wales show a record low in quarterly insolvencies. The first quarter of 2021 recorded a 21.9% fall, taking the previous quarter’s total of 3,053 down to 2,384. Year-on-year, the latest figure was 38.3% lower than in the same quarter of 2020 when 3,863 were recorded.

But R3 Eastern chairman Alistair Bacon said it was clear that a sharp rise in insolvencies is on the horizon.

“The fall in corporate insolvencies to the lowest quarterly total on record has been driven by a drop in all corporate insolvency processes. Additional government statistics published in April, however, show an increase in corporate insolvencies between February and March of this year,” he said.

“It’s clear that government support measures are still helping to keep businesses afloat, but they have pushed back rather than prevented the financial pain of the pandemic from translating into a sharp, sustained increase in corporate insolvencies.

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“The total number of corporate insolvencies between April 2020 and March 2021 fell by more than a third compared with the same period a year earlier, while gross domestic product (GDP) fell nearly eight per cent during the same period. A drop in corporate insolvencies of this scale during the current economic climate suggests that corporate insolvencies are about to rise – and rise sharply.”

Mr Bacon, of AMB Law in Ipswich, said companies in the region needed to keep a tight grip on their finances as the end to most government support measures looming in June and furlough is wound up in September.

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“Owners and directors need to keep a careful eye on their cashflow levels to ensure that they don’t fall into the trap of over-trading,” he said.

“They should also have a plan for reopening which is sustainable, so that they don’t undo their efforts to survive the last year by mismanaging the next couple of months.  

“R3 stresses that anyone who is concerned about their business’s finances should seek advice from a qualified source as soon as possible. Doing so will provide more options to turn around their financial situation, and more time to make a considered decision about the best solution for the future.”

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