‘Significant’ number of East businesses doubtful they can survive, expert fears

File photo dated 21/06/07 of people relaxing on Benalmadena Beach in Spain

Many travel companies went into the off-season in a precarious position and have not come out the other side, according to research by Mazars - Credit: PA

Creditors are starting to take action on unpaid company debt, East of England insolvency experts have warned.

Problems are mounting for firms across the region – from soaring inflation to continuing issues around Covid-19, said insolvency practitioner trade body R3 Eastern.

And they are now facing increasing pressure from their creditors as emergency measures preventing them from acting when the pandemic was at its height are lifted – leading to a dramatic rise in insolvencies.

The latest government insolvency statistics for England and Wales show corporate insolvencies rose by 105% in January 2022 to a total of 1,560 compared to January 2021’s figure of 758.

The Eastern branch of R3 believes that the doubling in corporate insolvencies suggests creditors are now starting to take action over unpaid debt – having been legally prevented from doing so since the start of the pandemic.

R3 Eastern chairman Alistair Bacon said the substantial increase in company failures was being driven by a rise in compulsory liquidations, which are 131.4% higher than this time last year.

“Numbers of Creditors’ Voluntary Liquidations have remained similar compared to this time last month, which suggests that many company directors are continuing to choose to close their businesses rather than attempting to carry on trading in the current climate,” he added.

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“These Insolvency Service figures indicate the toll the current climate is taking on local firms. Over the last two months, Eastern businesses have had to trade through a perfect storm of issues, including spiralling inflation and transport costs, new Covid measures and steep increases in energy prices.

“Against a backdrop of continued pandemic-related uncertainty, there is likely to be a significant number of directors who are doubtful that their business can survive much longer. In such cases, the sooner advice is sought from a qualified and reputable source, the more potential there is for a solution.”

Meanwhile research by accountancy firm Mazars suggests that UK travel agents and tour operators are among those at the sharp end – after a dire couple of years for the travel industry. Complicated restrictions and uncertainty have been followed by the rise of the Omicron coronavirus variant towards the latter part of last year.

The insolvencies total for the sector jumped from 68 to 82 in the past year, showing the impact of the pandemic on the sector, it said.

It followed the emergence of the Omicron variant, which coupled with lingering restrictions on UK tourists in some countries, has hit hopes of a return to demand for travel, its report said.

Rebecca Dacre of Mazars said: “Many travel companies went into the off-season in a precarious position and have not come out the other side.

“The on-off nature of travel restrictions has left lingering damage in the sector with many consumers having lost confidence and put off bookings.

“The insolvencies we’ve seen so far could just be the beginning. Omicron restrictions will have blunted the recovery of the holiday sector and are likely to have further hit travel companies.

R3 said many of its members offer a free consultation to those who are looking for help with their business’s finances and want to explore their options.