This month we report that 48% of businesses have noticed an upsurge in late payments, IVAs show a 24% increase in personal insolvency cases compared to the same period last year. Meanwhile corporate insolvencies appear to be showing some promising signs according to data published recently by the government insolvency service, which states a 20% drop in cases compared with March 2020, however the general consensus is that this figure is still an artificial representation of the true state of the economy, being propped up by government loan schemes that is helping some businesses “stay afloat” that would otherwise have become insolvent.
As the UK continues on the path laid out of lockdown and opening back up the economy, we continue to see further evidence that the ongoing situation is fuelling problems that could halt the recovery of trade across the country.
It should come as no surprise to the collections industry and according to latest reports late payment problems are beginning to negatively impact on many businesses cashflow.
It’s a problem that costs the average SME around £9,000 each year and can wreak havoc on a company’s cashflow, growth and even pose a serious risk of insolvency, as it does for thousands of businesses every year. Couple that with the pandemic, lockdown and economic uncertainty and it could spell a recipe for disaster for UK businesses who fail to act or don’t act swiftly enough, usually through fear of “falling out” with their customers.
Is this an early warning sign that the situation is likely to get worse before it begins to improve? For months many experts in the insolvency industry have been expecting high volumes of insolvency cases lurking on the horizon, once government support has dried up and the financial realities hit home for those who are currently balancing their commercial finances precariously.
That said the latest statistics on insolvency cases would appear to contradict the above.
It may seem like promising news after the year we’ve all had, however the figures don’t reflect the reality according to some industry experts.
According to figures published by accountancy firm EY (source The Guardian - Debt levels soar for business as UK economy struggles to recover from Covid – published 8th February 2021)
British businesses continue to be “propped up” by schemes designed to aid the economic recovery plan, inevitably however as loan repayment begin to kick in next month and these schemes come to an end, it’s expected that these figures will begin to significantly increase, which is not great for the economic outlook. Recovering from the impact of the last 12 months is expected to take years and the road out of this is not going to be an easy one.
Advice is to act early and seek advice if you are struggling now, so if you think your commercial cash flow may be squeezed in coming months. Acting on it sooner than later can open up more options when it comes to continuing trading and ultimately recovering.
In stark contrast to the commercial news, it appears the latest figures also show many individuals have been harder hit on their personal finances and are struggling to keep up with payments.
While the data doesn’t currently make it clear, it has been said that many of these cases could also be company owners, making the assumption that those unable to access the loan schemes have been hit hardest and have relied instead on personal finances to support their businesses, banking on “pent-up customer demand” as we come out of the lockdown restrictions.
As a general advisory it has been suggested that ALL businesses start the process of contacting and opening up lines of communications with their debtors and creditors (customers in general) in an attempt to seek workable re-payment plans for any debts they may be owed, or closely manage their exposure to creditors so as to avoid the potential pit falls of cashflow and bad debts building up leading to further insolvency cases.
Here at Breal Credit Management, this is exactly what we are doing on a day-to-day basis, for hundreds of companies (large and small) throughout the UK, so if you know anyone in need of advice or assistance in these matters, we are on a mission to help as many UK businesses get back to growth!
Share this article with them and tell them to get in touch for a no-obligation advisory consultation.