This morning the Insolvency Service published the latest company and individual insolvency data. Following on from this, four experts share their thoughts:
Svend Pearce, founder of the Watford-based small business accountant and bookkeeper, Bficient: “While it’s pleasing the pandemic appears to be under control, the debt accumulated by many companies to stay afloat is substantial. Much of the assistance came in the form of cheap loans with a grace period to commence repayment after 12 months. It’s sadly now payback time and the pain many businesses are now experiencing is real. Bounce Back and CBILS loan repayments are proving a significant drain on companies’ working capital. Restructuring any business is equally not without cash drains and so many directors will conclude that the battle is simply too great, future prospects too bleak and that further loans would simply be pouring fuel onto the fire. That the number of individual insolvencies is up is not surprising given the brutal economic conditions we’re in. Amid the cost of living crisis, and after two years of the pandemic, household finances are under a phenomenal amount of pressure. For small business owners, household and business finance are intertwined and they are experiencing reduced sales at the exact same time that they need more money to cope with rising bills at home. We anticipate more individual insolvencies as we proceed through 2022.”
Kevin Drew, Managing Director of Derby-based accountancy firm, Ascentant Accountancy: “We are seeing supply chains collapse in some sectors with suppliers going bust due to increased logistic and transport costs, fuel increases and utility costs in addition to difficulty recruiting staff. That is trickling down to businesses who are struggling to get hold of stock and also dealing with late payment or non-payment from squeezed end customers who are also feeling the pinch in their finances. In addition to the economic storm of increased haulage, fuel, utility and staffing costs, businesses have begun to repay BounceBack Loans, Recovery Loans and other Covid Support. Those businesses that have poor financial controls in place, don’t forecast cashflow, expenditure or revenue, and that don’t have their finger on the finance pulse within their business are suffering and will likely make up some of these insolvencies. As an accountant, I can’t stress enough how important it is to be undertaking Management Accounts, KPI reporting and cashflow forecasting, especially in the current climate.”
High Streets Task Force expert Dr Jackie Mulligan, and founder of ShopAppy: “The stories that lie behind these dire stats is my biggest worry. For many small businesses, this is not just a commercial but a personal blow, and one that will impact their lives and that of their families for some time. There is simply not enough being done to counter the long-term impacts of Covid lockdowns and the onslaught of rising costs for small businesses right now. Small businesses are the bedrock of communities and more importantly our national economy and more need to be done to support them.”
Marcus Wright, MD of Bolton Business Finance: “The latest company insolvency data is extremely worrying. It’s not just higher than the same quarter in 2021 but also higher than pre-Covid Q1 2020 figures. Businesses are really starting to feel the pressure, with many having barely recovered from Covid. Many businesses are out of the frying pan and into the fire, with inflation out of control, countless supply chain issues and energy at unsustainable prices, and that’s evident in this data. A lot of businesses that were propped up by Government Covid grants and support are now running out of money and are having to call it a day. Expect the data to worsen, potentially materially, during the second quarter. For many businesses, the current headwinds are a bridge too far.”
