The number of companies filing for administration across the South West has jumped by 10% year-on-year, according to a report by Interpath Advisory.
Analysis of notices in The Gazette by Interpath Advisory revealed that 55 companies based in the South West fell into administration in the first six months of 2023. This was up from 50 companies in the first six months of the previous year.
The financial advisory firm said that this was "further evidence" that 海角视频 insolvency activity is back to pre-pandemic levels following lows in 2020 and 2021. It speculated that was as a result of cost inflation and rising interest rates.
Interpath found that across the 海角视频 a total of 315 companies fell into administration in the second quarter of 2023, up from 212 in the same period last year, which is a 48.5% increase.
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High profile insolvencies seen across the South West during the first six months of 2023 included the administration of Tillery Valley Foods Limited, a producer and supplier of food to the NHS.
Lee Swinerd, director and head of Interpath’s Bristol team said: “It’s no surprise that a sluggish economy, stubbornly high inflation and tightening monetary policy are increasing the pressure on businesses up and down the country.
“Indeed, the interest rate conundrum appears to be the number one concern for many of the businesses that we are speaking to at the moment. With the expectation that it will take some time before we see rates start to come back down, the overall cost of borrowing is now hitting double figures – something which we’ve not seen in the 海角视频 for at least 15 years. This will have an impact on any business which relies on debt finance, and particularly those which are highly leveraged, or need to refinance existing debt in the coming months."
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The rising number of 海角视频 insolvencies in the second quarter of 2023 can be seen across a wide range of sectors, with companies operating in the building and construction, food and drink and professional services experiencing a notable number of appointments.
Mr Swinerd continued: ”At the same time, while we believe input prices have settled down and in some cases are falling back (such as fuel), many businesses are walking the wage inflation tightrope and are struggling with labour availability and recruitment, which is critical for the South West’s large hospitality sector. And consumers are cutting back on discretionary spending as the impact of those 13 consecutive interest rate rises puts a squeeze on disposable income.
“Given the recent hikes in interest rates and resultant increases in the cost of borrowing, one sector where we expect to see a marked rise in activity over the months ahead is real estate, from commercial and retail all the way through to residential. In particular, the long shadow cast by Covid on both the demand for and valuations of office and retail space will take some time to dissipate, potentially leaving some investors under water.”
While the number of administrations continues to rise, Interpath concluded that "recent data seems to suggest" the use of Restructuring Plans is also on the up. Following their introduction in the Corporate Insolvency and Governance Act 2020, a total of 20 restructuring plans have now been registered, with that of the Italian restaurant chain Prezzo sanctioned by the High Court on July 3 2023.
Mr Swinerd added: “After somewhat slack initial take-up, it seems that use of the restructuring plan is also starting to gather momentum as companies seek to explore alternative tools within the restructuring toolkit. What’s particularly interesting is that while early adoption centred on large corporates, we are starting to see increasing adoption in the mid-market space now that precedent has been developed around the parameters of the process.”
Looking ahead to the outlook for the rest of 2023, Mr Swinerd concluded: “The summer months often bring with them a fall in insolvency activity, but our own pipeline at Interpath suggests Q3 of this year could be just as busy as Q2. As ever, our advice to businesses is to maintain good visibility over cash inflows and outflows, identifying those pinch points, engaging with key stakeholders as soon as possible and seeking professional advice early if alarm bells start to ring.”
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