Lee Murphy , Managing Director of The Accountancy Partnership

Every month , we pose industry experts a question pertinent to the issues of the day . This month . . . .

ORPORATE INSOLVENCIES INCREASED by 71 % between July and September , a 40 % jump from the same period in the previous year .

With compulsory liquidations increasing to the highest quarterly number since the start of the pandemic , a business finance expert explains the steps business owners can take to avoid joining this statistic .

Lee Murphy , Managing Director of The Accountancy Partnership , said : “ The latest insolvency figures unfortunately come as little surprise . Earlier last year , creditors were allowed to begin pursuing unpaid debts previously prohibited by temporary legislation . At the same time , 30 % of small businesses warned that energy prices were their main concern and one in ten UK companies reported a moderate to severe risk of insolvency .

“ As economic turbulence becomes increasingly difficult for business owners to manage , and an estimated 79,000 businesses unable to repay their debts alongside any further increase to interest rates , it ’ s concerning that corporate insolvencies are likely to surpass the 71 % increase over the coming months .

“ Given that contractors often work to tight margins and fixed price contracts and have recently had to contend with the cost of raw materials increasing due to lack of availability , it ’ s unsurprising that the construction industry has experienced the highest level of insolvencies ( 19 %). This is followed by wholesale and retail trade ( 14 %) and accommodation and food services ( 12 %), all of which require a consistent supply chain to remain competitive and avoid passing their costs on to consumers .

“ The industries that struggled the most throughout the pandemic and had to fight for government support are now also most vulnerable to insolvency . Unlike the pandemic though , the government hasn ’ t put equivalent mechanisms in place to help business owners combat the new challenges they now face . As a result , many are left with little opportunity to remain solvent .

“ Sadly , many influencing factors simply aren ’ t within their control , so company directors will need to do all they can to try and make sure they aren ’ t left in a situation where ceasing trading is their only option . Even simple changes , such as staying on top of bookkeeping so that it ’ s as up-to-date as possible and regularly reviewing financial reports can make a substantial difference to understanding where essential revenue may be going missing .

“ This is a concerning time for UK businesses , so it ’ s crucial that directors take advantage of the resources available and seek support from accounting professionals at the soonest point possible . As 83 % of SME owners are concerned about their finances , taking these steps towards insolvency prevention isn ’ t just key for the health of the small businesses that sit at the heart of our economy , but also for the long-term mental health of their owners .”

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