Reduced business rates and renewed energy support needed ahead of Chancellor’s Budget
Insolvency figures released yesterday* for February 2023 by the Government’s Insolvency Service shows that the number of registered company insolvencies in February 2023 was 1,783. This 17% higher than in the same month in the previous year (1,518 in February 2022), and 33% higher than the number registered three years previously (pre-pandemic; 1,345 in February 2020).
Leading restructuring and insolvency professional Oliver Collinge from PKF GM in Leeds said: “The large rise in corporate insolvency numbers is not surprising compared to this time last year. High interest rates, persistent inflation, ongoing supply chain challenges and weak consumer confidence continue to provide real challenges for many businesses.
Budget support needed
”We’re hoping that the Chancellor’s Budget will provide some respite for company directors. Renewed energy support as well as a reduction in business rates to help ease the current pressures would be very high up the wish list.” said Oliver Collinge.
Firms across the board are facing multiple challenges, from the continued fall out of Brexit and the pandemic, to labour shortages and high energy costs and even better-performing businesses are not immune. Businesses in the hospitality, leisure and retail sectors are particularly at risk as evidenced by the recent collapses of Flybe, Paperchase and M&Co.
Company directors urged to act now
Oliver Collinge added: “We advise directors and their advisors to act now if they are experiencing cash flow pressure. It’s critical businesses act early and seek advice if they are struggling at the moment or they think cash flow may be squeezed in the coming months. The earlier they act, the more options they’ll have to secure the business’s long-term survival.”
“It can also be challenging for firms to prepare reliable forecasts given the current economic uncertainties, and this can make obtaining additional liquidity or capital more challenging. Speaking to an expert to discuss the options available is key.”
“For struggling businesses, it’s not too late to begin negotiations with landlords and creditors to develop manageable repayment plans. Will revenues be high enough to support your cost base? Will cash flows be sufficient to deal with the additional debt burden (both formal and informal) that has accrued during Covid? Perhaps a CVA is something which should be considered or, where you may need to take the difficult decision to make redundancies to survive, consider applying for government funding to meet the short-term cash impact of this.”
February 2023 insolvencies
• Of the 1,783 registered company insolvencies in February 2023:
• There were 1,505 CVLs, which is 13% higher than in February 2022 and 59% higher than in February 2020;
• 158 were compulsory liquidations, which is more than twice the number in February 2022, but 32% lower than February 2020;
• 12 were CVAs, which is four times higher than February 2022, but 37% lower than February 2020;
• There were 108 administrations, which is similar to February 2022, but 27% lower than February 2020;