More than 1,400 firms close as insolvencies soar

More than 1,400 firms ceased trading in September as insolvency figures reached their highest level since March 2020.

Finance experts fear there is worse to come as the furlough scheme and other government support for businesses have come to an end.

Some of the smaller energy suppliers were among the 1,446 companies to go bust in September – a 7.2% increase on August.

Other firms, like the chilled food delivery business EVCL Chill Derbyshire, also went under, partly because of the HGV driver shortage.

Overall, the number of insolvencies was up 56% compared with the September 2020 figure of 928.

A report by the Bank of England says that a third of the UK’s small businesses were classified as highly indebted with debt levels of more than 10 times their cash balances, compared with 14% before Covid-19.

Garry Lee, chair of the insolvency and restructuring trade body R3 in the south, said: “The dramatic increase in corporate insolvencies illustrates just how crucial the government’s support has been in keeping businesses afloat and suggests that there may be a rocky road ahead for the business community now it has ended.

“The monthly increase in corporate insolvencies was driven by a rise in Creditors’ Voluntary Liquidations, which increased for the third consecutive month.

“This suggests that directors are choosing to close their businesses after deeming their financial survival unlikely after 18 months of trading through a pandemic.“Despite the fact that businesses have benefited from two months of restriction-free trading and the economic boost over the summer, conditions are still not back to where they were before the pandemic.

“Consumers are now increasingly cautious about the state of the economy, their personal finances and the increased cost of living and are more wary about spending their money.

“And with widespread supply chain disruption and significant wholesale energy price increases building up between September and October, there is likely to be little slack in the system for businesses and individuals who have yet to get back on their feet following the impact of Covid.”

The gloomy outlook emphasises the need for businesses to keep a tight rein on cash flow and to take prompt action ensure invoices are paid on time.

Please contact us if you would like help with credit control and debt collection.