Wave of Company Insolvencies Forecast for This Year
A wave of corporate insolvencies has been forecast for the UK in the coming months unless swift action can be taken by the government to avoid that scenario.
According to the insolvency and liquidation experts of Begbies Traynor, there are warning signs within the economy that a growing number of companies will be heading out of business in the coming months.
Among the indicators being cited as evidence of a likely rise in corporate insolvencies and liquidations is the very sharp rise in County Court Judgements (CCJs) being recorded recently.
The latest data shows that there were some 22,552 CCJs in the first three months of this year, which represents a massive 157 per cent increase compared to the same period last year.
Meanwhile, March this year saw the highest number of CCJs recorded for a single month in five years, which reflects a growing prevalence of court cases being heard based on creditors pursuing their debtors for money they believe they’re owed.
Close to 2,000 companies were estimated to be in a position of critical financial distress in the first quarter of this year, which is an increase of around a fifth compared to the same figure for Q1 2021.
Sectors within which rates of acute financial distress are understood to be rising particularly sharply include the construction sector and the hospitality sector.
With inflationary pressures now worrying company directors across industries, the feeling among Begbies Traynor’s experts is that steep rises in corporate insolvency and liquidation cases could soon be in evidence.
Julie Palmer, a partner with the company, has said that the government could potentially help cash-strapped firms by offering a degree of leniency to businesses finding it tough to repay the emergency Covid loans they took on during the worst phases of the pandemic.
“Taking a hard line on repaying CBILS and other loans would likely drive businesses over the edge,” Ms Palmer observed in her recent statements on the subject.
“We could see an approach similar to war bonds, with terms being extended as ministers follow the adage that a rolling loan gathers no loss,” she noted.
However, Ms Palmer has also expressed concern at the current rates at which debtor companies are being pursued legally by their creditors.
“The critical distress and CCJ data are likely predictors of a wave of insolvencies coming – it’s just a case of when the dam holding it back finally bursts,” she said.