Jodie Wildridge, deputy chair of the UK’s insolvency and restructuring trade body R3 in Yorkshire and a barrister at Exchange Chambers in Leeds, said: “The slight month-on-month reduction in corporate insolvency numbers is due to a fall in Compulsory Liquidations compared to last month’s figures. However, the corporate insolvency statistics published today are higher than they were a year ago and show that demand for insolvency support and the number of firms entering insolvency processes are still high.
“Creditors’ Voluntary Liquidation, Administration and Company Voluntary Arrangement numbers are higher than they were last month and last March, and reflect a business climate that is being shaped and buffeted by national and global political issues, which are adding further pressure on firms. Creditors also remain prepared to turn to winding-up orders to pursue monies owed, whether that is to recover money for the public purse in HMRC’s case, or to help address their own debts in the case of those creditors from the private sector.
“The announcement of the US tariffs and the rises in National Minimum Wage and Employers NI have caused directors most concern over the last few weeks. These have added further strain on businesses that have been dealing with increases in costs, and contractions and caution around spending for more than 18 months, all of which have hit margins, confidence, and in many cases, firms’ ability to stay solvent. For many small businesses particularly, an increase in late payments has a further knock on impact on liquidity and profitability, in already tight trading conditions for the small business community.
“While it is too early to understand the extent of the impact the tariffs will have on businesses, we know they will affect purchase and sale prices, and will subsequently affect margins and profits, and potentially firms’ ability to service debt and source rescue funding.
“At the same time, March was the last month before the National Insurance and Minimum Wage increases came in, and we know this has affected business confidence, recruitment and investment, as well as driving increases in enquiries for restructuring advice and support. We will see the impact of this policy on businesses from this month, and from the next set of figures, but if firms have not made the most of the time between its announcement and introduction, we could see an increase in corporate insolvency numbers over the next quarter.
“From a sectoral perspective, construction output has been affected by mixed weather since the start of the year and ongoing issues with payment and costs, while retail has seen a slowdown in spending as a result of this year’s late Easter. Hospitality spending has increased in recent months in part due to the warmer weather and as consumers seem more willing to spend money on going out than they had been previously.
“Restructuring Plans remain a key topic of discussion in the profession, with HMRC’s recent support in the Enzen and OutsideClinic cases sparking hope that this might further improve take-up of this process among mid-market firms. Questions still remain around how Restructuring Plans can be made accessible to SMEs, with cost being the biggest issue to resolve, and this is something the profession will continue to explore over this year as we work to find a solution.
“When it comes to personal insolvencies, the monthly decrease is down to a fall in Debt Relief Order (DRO) and Individual Voluntary Arrangement (IVA) numbers, while the year-on-year increase is driven by an increase in DRO levels, and is likely to be because of the changes to the DRO entry criteria that were introduced in April of last year. When these trends and the fact that Breathing Space numbers have increased month-on-month and year-on-year are considered, it is clear that there is still a real and serious issue with debt in England and Wales, and the severity of that is increasing.
“The key factor behind this is likely to be the ongoing cost of living, which continues to be an issue for households across England and Wales. While inflation is slowing, people’s money is still going less far than it did three, six and 12 months ago, and a number of household bills have increased from this month, which will put further pressure on stretched finances and cause increased concern for those for whom money is already tight.
“Cost-consciousness is making people cautious about their spending and causing them to continue to hunt for deals wherever they possibly can. However, these cuts are likely to come from the weekly shop, as there is still some willingness to spend on non-essentials. More broadly, consumers remain concerned about the economy and their own finances, and are reluctant to make major purchases unless they are strictly necessary amidst concern about the impact the tariffs, rising bills and the potential for further increases in inflation could have on their outgoings.
“Our message to anyone who is worried about their business or household finances is to seek advice as soon as you become concerned or as soon as you see any indications there could be a problem. It is an incredibly hard conversation to have, but discussing your worries with a qualified advisor gives you more time to decide on your next step and more options than if you had waited until a problem became a more severe one. Most R3 members will give prospective clients a free consultation so they can learn more about the issues they face and outline the potential options open to them to resolve them.”