Insolvencies fall as energy support for businesses scaled back
The number of companies filing for administration across the South West fell by 13% on last year despite rising inflation, energy bills and interest rates continuing to challenge businesses.
Analysis of notices in The Gazette by Interpath Advisory reveals that a total of 20 companies based in the South West fell into administration in Q1 2023 – down from 23 companies in Q1 2022, and representing a 13% decrease on last year.
This does not reflect the UK picture, however, which saw a total of 285 companies fall into administration in Q1 2023 – up from 246 companies in Q1 2022, a 16% increase on last year, and the highest Q1 total insolvencies since pre-pandemic levels in Q1 2020.
Lee Swinerd, director and head of Interpath’s Bristol team, 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.”
Swinerd continued: “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 Q1 2023 can be seen across a wide range of sectors, with building and construction, manufacturing and retail experiencing the highest number of appointments.
Swinerd 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 to 8 appointments in Q1 2022.
Looking ahead to the outlook for the rest of 2023, Lee Swinerd said: “There is no doubt that corporates in general have fared much better than the doom and gloom predicted last year. However, with a highly uncertain economic outlook, it is key that businesses prioritise their liquidity and cash management, identifying potential cash pinch points as early as they can and implementing cost-saving schemes to protect margins. In addition, businesses can seek to simplify their product ranges to assist with both supply chain challenges and take out unnecessary costs. Seeking advice early and engaging with stakeholders will help to provide additional cash headroom and improve performance.”
