South: Business closures 'are on horizon'

Businesses in the south and Thames Valley are being warned of difficult months ahead by R3, the trade body for restructuring and insolvency professionals.

It says concerns are mounting that a wave of business closures could be on the horizon in the first months of 2021.

The comments come after the publication of October insolvency figures for England and Wales.

The government statistics from The Insolvency Service revealed that corporate insolvencies fell slightly on September 2020 and were sharply down on October 2019. Personal insolvencies were up on both the month and the year before.

The figures were:

• Corporate insolvencies decreased to 856 in October 2020 compared to September’s figure of 925, and remained well below October 2019's figure of 1,485.
• Personal insolvencies increased to 11,939 in October 2020 compared to September's figure of 7,458, and were higher than October 2019's figure of 10,030.

Garry Lee, chair of R3’s Southern and Thames Valley region, said: “The continued low levels of corporate insolvency can once again be traced back to high levels of Government support and widespread creditor forbearance, both compelled and voluntary.

“With these numbers still far below their pre-pandemic levels, worries are mounting within the profession that a wave of business closures could be on the horizon.

“This includes both companies which would have become insolvent in the normal scheme of things, along with those businesses dealt a fatal blow by the pandemic.

“Gravity cannot be defied forever. With temporary measures stopping creditor enforcement actions against debtors due to expire at the end of the year, the first few months of 2021 could turn out to be difficult ones for businesses which have built up arrears with landlords, suppliers, or HMRC.”

Lee, who is an associate director in the recovery and restructuring services department at accountancy firm Smith & Williamson, also warned that the current national lockdown and reduced Christmas spending could have an impact.

He said: “Even with the announcement that furlough will be extended until the end of March, job losses are mounting and many people are entering the run-up to the festive season in a precarious financial position.

“With constraints on usual levels of pre-Christmas spending, there is a danger that reduced consumer outlay, exacerbated by personal financial uncertainty, leads to more pain for businesses, who will then be forced to consider more redundancies, in a vicious circle effect.”

Lee added: “Debt problems can quickly turn from a snowball to an avalanche.

“The importance of speaking to a qualified and regulated advisor at the first signs of trouble cannot be overstated, to help individuals or business owners find a way back to financial stability.”