Government support helps fend off mass insolvencies

The number of Yorkshire and North East businesses entering administration during April remained steady, according to the latest figures released by KPMG’s Restructuring practice.

Eight Yorkshire and North East businesses fell into administration last month.

Meanwhile, the first quarter of the year saw business administrations in Yorkshire and the North East increase by more than a quarter (27%) compared to the previous quarter last year, with 47 administrations recorded between January and March.

When compared to the same period at the beginning of 2019, administrations fell by more than a tenth (11%), down from 53.

Howard Smith, associate partner at KPMG in Leeds, said: “Comfort can be taken from the fact that we haven’t yet seen the deluge of companies falling into administration across the region that looked likely before the Government’s support measures, particularly the Coronavirus Job Retention Scheme, were announced.

“In most cases, the Government’s support measures have been complemented by a supportive approach from lenders and creditors, and this has given organisations vital breathing space in these early days of the crisis.

“The proposed changes to insolvency legislation, which include the suspension to wrongful trading rules, are also likely to help relieve the pressure on directors, many of which have chosen to cut back trading and/or enter hibernation where they may previously have had little choice but to appoint administrators.

“As we look forward, the old adage that ‘more companies fail coming out of a recession than fail going into it’ will be front of mind for many executives who now are trying to forward plan their exit from lockdown.

“One of the biggest challenges facing businesses in our region is mapping how demand will build as lockdown rules are eased.

“Many will have burnt through cash reserves during the lockdown period and, while some will have taken advantage of the various Government support packages available, they will have relied upon short term support from creditors.

“Ramping up trade will require re-engaging staff who have been furloughed and careful management of suppliers and landlords. Businesses will also need to plan for repayment of tax deferrals and additional loans.”