North East insolvency experts have warned of a “harsh business climate” after the number of companies going out of business in the Ƶ went to a 30-year high in 2023.
Recent figures from the Insolvency Service revealed that 25,158 firms across England and Wales went bust last year – up 14% on 2022 and the highest annual number since 1993. The number of creditors’ voluntary liquidations (CVLs) surged 9% to 20,577, marking the highest since records began in 1960.
High-profile North East companies including Tolent, Metnor and Great Annual Savings were among those to go into administration last year, while a recent report warned of high numbers of North East firms in ‘critical’ distress.
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There are also some signs for optimism over the year ahead, with hopes that lower inflation may see the Bank of England cut interest rates this year. But retail and hospitality firms are set to be hit hard by an incoming increase in the national living wage, while construction firms are suffering amid a downturn in the housing market from higher interest rates.
Chris Ferguson, North East chair of insolvency and restructuring trade body R3, said: “The last year has seen a rising tide of corporate insolvencies. A combination of increased costs, cautious spending, creditor pressure, and the post-pandemic hangover have seen more businesses enter a corporate insolvency process to help address their financial issues than last year. Unless the economic picture improves, costs come down and people start spending, it seems likely that insolvency numbers will remain high this year.
“Increases in Creditors’ Voluntary Liquidations (CVLs), Compulsory Liquidations and administrations have driven corporate insolvencies to a 30-year high. More directors have turned to CVLs this year compared to last year as a combination of fatigue, pressure from creditors and tough trading conditions have led to them shutting their doors while the decision to do so is theirs to make, and pushed the number for these insolvency processes to the highest quarterly total in more than 60 years.
“Similar factors are driving the increase in administrations, but the harsh business climate has to be the biggest. The upsurge in consumer spending that many businesses had been hoping for since the end of lockdown hasn’t happened, or at least hasn’t been sustained, and the firms who were hanging on and hoping for it have simply run out of time and money.”
Mr Ferguson, who is a director and head of recovery & insolvency at Newcastle’s RMT Accountants & Business Advisors, said companies worried about their future should seek professional help.
In more positive news, businesses in the North East have tied with London as the most confident in the Ƶ in January, according to the latest Business Barometer from Lloyds Bank Commercial Banking. North East companies reported higher confidence in both their own business prospects and optimism in the wider economy.
Martyn Kendrick, regional director for the North East at Lloyds Bank Commercial Banking, said: “There’s reason to be cheerful – this year will bring some major growth opportunities for the region’s businesses. This includes the ongoing development of the new North East Investment Zone, which has the potential to underpin thousands of jobs and further cement the region’s leadership in key areas like clean energy and green manufacturing, cascading benefits across the North East and its communities.”
