Business experts in the North East are warning that the “insolvency dam has burst” following a number of high profile company failures.
The North East chair of insolvency and restructuring trade body R3, Chris Ferguson, was speaking after the publication of official statistics which showed there were 22,109 corporate insolvencies in England and Wales last year, a 57% rise on the previous year.
Last week saw long-established North East fair trade company Traidcraft go out of business while Killingworth firm Metnor Construction has filed notice of going into administration. The last few days has seen one of the region’s largest construction firms, Tolent, suffer major financial difficulties that are threatening its future.
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Figures from the Insolvency Service statistics show that the number of firms put into liquidation through Creditors’ Voluntary Liquidations has reached its highest level in more than 60 years. Mr Ferguson, who is head of recovery and insolvency at Gosforth-based RMT Accountants & Business Advisors, said: “After two years of being supressed by Government support schemes, the insolvency dam burst in 2022 and corporate insolvency numbers across England and Wales hit a 13-year high.
“This was mainly down to Creditors’ Voluntary Liquidations reaching their highest level in 62 years, with directors increasingly choosing to close their businesses due to concerns about their ongoing viability. After nearly three years of trading through a pandemic, and in the face of a sustained period of challenging economic conditions, rising costs and a cost-of-living crisis, many directors clearly felt they had ran out of road last year and chose to close their businesses.”
Many businesses have faced significant challenges over the last few years due to the Covid pandemic, soaring inflation and reduced consumer spending in the cost-of-living crisis. The removal of the Government’s remaining temporary pandemic insolvency measures in April last year, which had protected companies in pandemic-related financial distress from action by creditors, has also been a factor in the increase of company failures last year.
The latest company to feel some of those pressures is Gateshead firm Tolent, a £200m business which employs around 450 people. The company – which has been involved in some of the region’s largest recent building projects, including Hadrian’s Tower in Newcastle, the Milburngate development in Durham and Riverside Sunderland – is believed to have called in business advisers in a bid to help secure its survival.
Some of Tolent’s problems were revealed in its most recent accounts, in which it described a “perfect storm” of adverse trading conditions.
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