Threats to business solvency are unlikely to go away anytime soon, one of the North East's top restructuring professionals says.
After a year in which the region saw the demise of high profile names such as Tolent, VBites and Great Annual Savings Group, Andy Haslam, partner at FRP Advisory, says conditions are unlikely to improve dramatically in the near term. The seasoned insolvency professional, who has dealt with a raft of business failures in 2023, said that many "brilliant" business had been pushed to the brink by factors outside of their control.
He said: "Regrettably, there has been upsurge in insolvencies and as we enter 2024, resilience and enterprise are the two attributes that business leaders will need to navigate the months ahead. Looking back only a short while ago, the 海角视频 economy broke out of the Covid-19 pandemic with some optimism for a rebound. Growth plans were dusted off and industry looked to storm ahead. However, unlike the economic slumps of the previous couple of decades, we have seen an incredibly diverse and intensifying range of factors come into play that have hampered any bullish notions.
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"Directors are facing a myriad of problems. Their cost bases are rising due to input prices, not least from the energy market, salary inflation and those on the ‘wrong’ side of the depreciation of Sterling, while revenues are fragile given soft demand. All of these are manageable in more benign economic times, but now financing options are more limited and servicing existing debts has become difficult for many. This comes amidst an increasingly challenging geo-political environment and other international factors, such as the continued impact of Brexit. "
Mr Haslam went on to say that conditions called for the resilience that defines the North East business community, but urged directors to seek early advice. He added: "In 2024, it will be important for management teams to spot the red flags that can often be overlooked. For example, missing HMRC payments, plummeting margins, drifting payments by suppliers and a looming refinancing. It’s also important to pay attention to factors closer to home, such as directors needing to take money out of a business, rather than putting it in. The notion of only having to identify one of these trigger signs is long gone and it is likely that several warning lights will flash for businesses over the coming months."
Mr Haslam's comments come on the back of a spike in insolvencies in November, which saw a 21% rise on the same month in 2022 to 2,466. That number was higher than pre-pandemic levels and economists at PwC have warned that corporate insolvencies could next year rise to the highest level since 2004.
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Speaking after November's figures, Nick O’Reilly, restructuring and recovery director at business advisory association MHA, said: "This is a significant upward trend that we are likely to see gathering pace as we head into 2024. In the last 12 months, we have seen an increase of 16% in insolvencies compared to the same period last year. This growth has been primarily driven by smaller businesses having difficulty paying back government Covid support leading to an uptick in the number of Creditor’s Voluntary Liquidations.
“However, as we head into 2024, we are likely to see more large-scale administrations compared to 2022 and 2023, as the impact of high interest rates begins to bite even further. Next year is likely to be the busiest year for insolvencies since 1992 as similar challenging conditions will prevail — ongoing conflicts in Ukraine and the Middle East, falling house prices, low levels of consumer confidence — combined with the lack of availability of interest payment holidays. This is highly likely to lead to some high-profile casualties.”