The number of companies filing for administration across the North East and Yorkshire increased by nearly a third in the last quarter.
Analysis of The Gazette data by insolvency specialist Interpath Advisory show 45 firms from the North East and Yorkshire collapsed into administration between July and September, up from 34 in the same period last year. Covid debt fallout, price rises and supply chain issues are among the issues blamed for the steep rise.
A number of sectors have been impacted, including building and construction, automotive supply chain, industrial manufacturing, leisure and hospitality, retail and food and drink. The regions' figures are in line with the broader 海角视频 picture, which saw 265 companies enter administration in the third quarter - up from 176 in the same period the year before.
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James Lumb, managing director in Interpath’s team in the North East, said: “The summer months often herald a quieter period for corporate insolvencies, and so the fact that August witnessed the highest monthly total in more than two years is particularly telling. We know that companies across the North East have been wrestling with a myriad of issues for some time, from excess debts post-Covid, rampant inflation, to supply chain challenges, to labour shortages, so this is perhaps the first real evidence that a significant shift in activity is now under way.”
"And let’s remember: the bulk of administrations seen in the past quarter landed well before the economic and political storm that we’ve witnessed in the past few weeks. The impact of rising interest rates, currency and gilt yield movements, and the increase in energy prices are yet to feed through, but undoubtedly will only serve to compound the extraordinary pressure that local businesses were already under. In particular, they put pressure on sectors that have – up until recently – been strong, like property investment.
"We’re now in a situation where interest rates may well be above 5% by Spring of next year, putting increased pressure on cashflows for businesses with high debt levels, and especially those with an unhedged position or a refinance event approaching. Further, with suppliers trying to navigate the impact of a weaker Sterling, and consumers adjusting to rising mortgages and lower disposable income, businesses are going to be squeezed in all directions.
Mr Lumb added: “While the Government has intervened to provide certain relief in respect of rising energy costs and new loans for start-ups and small businesses, for many businesses, some difficult choices lie ahead. Speaking from our own experience at Interpath, we are certainly seeing a rise in activity across the region and, based on our current pipeline, we would suggest that by the end of Q4 this year insolvency levels will have risen even further. As pressures mount, the time businesses have to make key decisions reduces. Identifying cash pinch points and seeking advice early will be key for business over the coming weeks and months.”
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Wider Insolvency Service statistics reveal a 43.4% increase on the number of corporate insolvencies in England and Wales in August, compared with the same month last year. Chris Ferguson, head of recovery and insolvency at Newcastle-based RMT Accountants & Business Advisors and North East chair of insolvency trade body R3, encouraged directors of struggling North East firms to be proactive in tackling emerging difficulties.
Mr Ferguson said: "These figures are a sobering reminder to both businesses and the government of the scale of the challenge facing the 海角视频 economy as we head into the winter months, and reflect the continued toll the sustained economic turbulence is taking on companies across England and Wales.
"The monthly increase in corporate insolvencies, to the third highest set of monthly statistics since January 2019, has mainly been caused by an increase in the number of Creditors’ Voluntary Liquidations. This suggests that directors do not consider that they are able to continue to trade in the current climate, and are choosing to close their businesses instead of pursuing alternative turnaround solutions.
"Even taking recent government support measures into account, North East firms are facing enormous running cost hikes just as household spending is facing its biggest squeeze in several decades, which delivers yet another blow to business owners who are still trying to recover from the impact to their businesses from the pandemic. It is clear that rising supply and energy costs, and the effect these have on margins, are of paramount concern to directors and management teams across the region.
"Accepting that your business needs help can be difficult but acting swiftly to address problems gives access to a much wider range of
potential turnaround solutions."
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