Drop in recorded insolvencies ‘could mask huge rise in East’
- Credit: Victoria Pertusa
A month-on-month fall recorded in insolvencies across England and Wales may actually be masking a “huge” rise, East of England insolvency experts fear.
R3 Eastern – the insolvency practitioners’ body for the region – said while government Insolvency Service figures show a national 11.4% drop in firms collapsing in December 2021 to a total of 1,486 compared to the previous month, the picture on the ground here is very different.
Alistair Bacon – who is chairman of R3 Eastern as well as founder of AMB Law in Ipswich – said the official figures could be masking the true situation in this region.
“The national monthly fall in corporate insolvencies does not reflect anecdotal evidence locally which suggests a huge increase in insolvencies in the last few weeks,” he said.
“My firm, for example, has dealt with eight pre-pack administrations since the end of November, which is more than we had handled since the beginning of the pandemic.
“When a longer-term view of the national data is taken, however, it more accurately demonstrates what may be happening here in the region. The latest monthly corporate insolvency statistic is a 20.1% increase on December 2020’s figure of 1,237, and 32.7% above the 1,120 figure for December 2019.
“These increases were driven by a rise in Creditors Voluntary Liquidations, which suggests that the economic situation has pushed – and continues to push – many company directors to close their businesses voluntarily before that decision is made for them.”
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Mr Bacon said East businesses in sectors such as retail and hospitality were having a tough time. They faced some particularly challenging weeks during the peak Christmas period which was severely affected by Covid restrictions and staffing issues.
“A sharp rise in Covid cases, increasing costs and falling consumer confidence hit footfall, personnel and sales throughout December. Company directors and management teams have also had to work in the midst of new Covid restrictions, which will have affected day-to-day operations, customer behaviour and revenue levels,” he said.
“Although the latest Covid restrictions are set to be lifted, local business owners still need to remain alert, and if the measures lead to their business becoming financially distressed, they should seek advice as soon as possible.
“Most insolvency practitioners in the Eastern region 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 available.”