Rate of NW business administrations increase over first quarter
Company failures in the North West rose four per cent in the first quarter this year, as rising inflation, energy bills and interest rates continued to take their toll on businesses.
Analysis of notices in The Gazette by Interpath Advisory reveals that a total of 54 companies based in the region fell into administration in the first quarter of 2023, up from 52 in the same quarter a year ago.
This mirrors the UK picture which saw a total of 285 companies fall into administration in quarter one 2023, up from 246 in 2022, a 16% increase on last year, and the highest first quarter total insolvencies since pre-pandemic levels in Q1 2020.
Rick Harrison, managing director and head of Interpath’s team in the North West, said: “It has been an extremely challenging few years for UK businesses trying to navigate rising inflation and interest rates, political turbulence and changes in consumer confidence, all following a global pandemic.
“Yet, in spite of these disruptive economic conditions, we have seen relatively low levels of insolvencies over the last three years, proving many British businesses to be remarkably resilient.”
He added: “It remains to be seen, however, whether this changes now that government support has been tapered.
“The energy support scheme for businesses was replaced earlier this month with the Energy Bills Discount Scheme which is only applicable to the most intensive energy users. Interestingly, there are a number of sectors not eligible for the scheme that still use a lot of energy such as pubs, restaurants, and other leisure businesses.
“With energy bills likely to remain elevated for the foreseeable future, many businesses will be keeping an extra close eye on costs, looking at their cash flows and considering whether to pass on extra operating costs in the form of price rises.”
The rising number of UK insolvencies in the first quarter of 2023 can be seen across a wide range of sectors, with building and construction, manufacturing and retail experiencing the highest number of appointments.
Rick Harrison said: “The pandemic and broader economic headwinds have made the last few years a particularly tough period for UK businesses, with a number of high profile appointments in the first quarter of this year including the administrations of Flybe Limited and Tolent plc, as well as the near miss of Silicon Valley Bank UK.
“Indeed, the international banking sector, in particular, has experienced a fair amount of turbulence in recent months, with SVB, Credit Suisse, Signature Bank, and First Republic Bank all making headlines.”
Another sector facing increasing pressures is the food and drink industry, where insolvency appointments have doubled on last year, with 16 appointments in Q1 2023 compared with eight appointments in Q1 2022.
Mr Harrison said: “The food and drink sector is currently facing several challenges including supply chain issues, increasing costs, and labour shortages.
“Producers are struggling to deal with an average input cost inflation of over 20%, coupled with changing markets and cooling consumer demand.
“In addition, the food supply chain is heavily reliant on the energy sector, and the current market is volatile to incremental price increases. This leaves businesses unable to push cost increases onto the end consumer as they strive to remain competitive during the current cost of living crisis. For long term stability, food and drink companies will certainly need to maintain visibility of their supply chain, to ensure its resilience.”
Looking ahead to the outlook for the rest of 2023, he said: “There is no doubt that corporates in general have fared much better than the doom and gloom predicted last year.”
