The number of corporate insolvencies in the North East has fallen slightly in the first three months of the year but remains at worrying levels, industry experts say.
Official insolvency figures revealed a 3.7% quarter-on-quarter fall in the number of corporate insolvencies across England and Wales between the final three months of last year (5,969) and the first three months of 2023 (5,747). But the figures were significantly higher than the same period in 2022, 2021 and 2019.
The Insolvency Service statistics showed that the number of corporate insolvencies across England and Wales between January and March was the highest first quarter figure in more than a decade. The number of firms being put into liquidation through Creditors’ Voluntary Liquidations (CVLs) remain close to their highest level in more than six decades.
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Chris Ferguson, North East chair of insolvency and restructuring trade body R3, said: “A small dip in overall corporate insolvency levels doesn’t hide the fact that directors are still choosing to close their businesses and more creditors are actively pursuing unpaid debts than 12 months ago. Firms are still struggling as the trading climate remains challenging, and unless the economic picture improves, it’s unlikely numbers will drop in the near future.
“Despite the quarterly fall in numbers, Q1 2023’s corporate insolvency figures are the highest first quarter’s figures for more than a decade and the second-highest overall figures in the same period as firms find themselves caught between spiralling costs and increasing creditor pressure. Numbers of Creditors’ Voluntary Liquidations, which are the highest number we’ve seen for a first quarter in more than a decade, are the key driver of this, and reflect the fact that many directors are choosing to close their businesses now while the option is theirs to exercise.
“Compulsory Liquidation numbers are lower than three months ago, but are significantly up on this time last year as creditors make use of the change in winding-up petition legislation to pursue the debts they are owed. Alongside these issues, firms are operating in a world of rising cost and falling margins as consumers cut spending right back to the basics – and even then looking to save money wherever they can.”
Mr Ferguson said that money worries, particularly linked to rising food and energy costs, were impacting on consumers and reducing the amount of disposable income for people to spend with North East businesses. He said business owners needed to stay “vigilant” and seek early advice if they had concerns about the health of their businesses.
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