NW corporate insolvencies surge by 65% as financial pressures increase

Rick Harrison

Corporate insolvencies in the North West rose by 65% in the first six months of 2022.

Businesses are feeling the pressure of spiralling inflation, rising interest rates and energy costs, supply chain disruption and ongoing geo-political uncertainty.

Analysis of notices in The Gazette, by Interpath Advisory, reveals that a total of 86 companies based in the North West fell into administration from January to June 2022 – up from 52 during the same period in 2021.

This mirrors the UK picture which saw a total of 451 companies fall into administration in H1 2022 – up from 312 companies in H1 2021, but still not back at the pre-pandemic levels of 655 in H1 2020 and 686 in H1 2019.

March saw the highest monthly levels of administrations since July 2020, with 101 appointments.

The rising number of insolvencies can be seen across a wide range of sectors, with building and construction, industrial manufacturing, and retail industries experiencing the sharpest rises.

Rick Harrison, managing director and head of Interpath’s team in the North West, said: “Businesses up and down the country continue to be buffeted by an array of headwinds, from inflation and interest rate rises, to supply chain disruption and staff shortages, not forgetting the war in Ukraine which has put further pressure on energy prices and supply chains.

“Inflation – both in terms of input costs and wages – is proving to be a particular challenge as organisations tread that fine line of how much they can pass rising input costs on to customers, while wrestling with the conundrum of balancing pay rises against double-digit inflation.”

He added: “With five consecutive interest rises over recent months, and undoubtedly more to come, plus fuel and energy costs continuing to rise, there’s no surprise that both consumers and businesses alike are thought to be preparing to batten down the hatches in the autumn.

“Many businesses are now spending the cash buffers built up over the last couple of years, and so from a cashflow perspective, appear to be reasonably healthy. However, their balance sheets and profit and loss (P&L) statements are weak, and the reality is that it won’t be too long before cash outflows catch up.

“Remember, a large number of businesses were propped up during the pandemic by the myriad of government support schemes, coupled with a supportive lending environment, leading to higher availability of cash.

“However, anecdotally we are now starting to see two things. First, in certain circumstances, institutions are becoming more cautious in their approach to lending. Should even a small number of lenders start to catch a cold, this will become problematic for businesses, as they burn through their cash reserves, and inflation continues to rise.

“Secondly, in recent weeks we have seen instances of enforcement action being taken and winding-up petitions being issued. While it’s too early to say that this is becoming a trend, it’s certainly notable given the moratorium on enforcement that was in place during the pandemic.”

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