Regional insolvency-related activity spikes sharply

R3’s analysis of data provided by Creditsafe showed a major increase in insolvency-related activities from 173 in September to 293 in October – these include administrator and liquidator appointments together with creditors’ meetings.

This number remains stubbornly sizeable and is the highest since March 2022.

The South East figure for insolvency-related activities is the fifth highest in the UK, behind Greater London, which has 614, the North West 439, East Anglia 417 and Yorkshire & Humberside 309.

The findings also revealed the number of firms in liquidation which owed money to their creditors in the South East has dropped from 334 in September to 244 in October.

Neil Stewart, chairman of R3’s Southern and Thames Valley region, said the major increase in regional insolvency related activity in October indicated that the business climate remained difficult as firms faced a multitude of problems including ongoing cost challenges.

“In addition to the difficulties they were already grappling with, before the October budget businesses were worried (rightly, as it turned out) about potential future tax rises. Projects were put on hold and R3 members saw an increased demand for advice and support around Members’ Voluntary Liquidations in the run up to the budget.

“In addition, the conflict and increased instability in the Middle East continues to concern UK businesses, with potential for disrupted trade routes and supply chains, affecting businesses, particularly in the energy, manufacturing, and retail sectors that rely on imports or exports from the region.

“Announcements made by the Chancellor, Rachel Reeves in her maiden budget have caused no little consternation within the business community. While we must wait and see over the next few months what effect these measures have on insolvency-related activities, the expectation is that those activities will increase, at least in the short term.

“A great deal has already been said about the headline rate of employers’ national insurance contributions being increased from 13.8% to 15% from April next year with the earnings threshold lowered to £5,000 from £9,100.

“The combined effect of the NIC increase and lower threshold will have a major impact on many businesses and, indirectly, their employees. Some businesses will not survive.

“Inheritance tax changes are another area of concern. They will make it more difficult for some sectors, such as farming, where the business previously qualified for 100% relief on IHT on agricultural and business property. With the benefit of that provision, they survived through generations.

“From April 2026, there will be a 20% tax on assets worth more than £1million. As a result, some farms will face the possibility of having to sell assets to pay IHT falling due when the owner dies.

“However, there is some positive news for business. For example, the rate of corporation tax will be held at 25% for the rest of this Parliament as part of a Corporation Tax Roadmap (including R&D tax reliefs) which is intended to give confidence to business and encourage growth. Let’s hope they do and that the OBR’s somewhat gloomy forecast for the UK economy turns out to be overly pessimistic”

R3’s Southern & Thames Valley region includes Kent, Surrey, Sussex, Buckinghamshire, Oxfordshire, Hampshire, the Isle of Wight, Dorset, Wiltshire and Berkshire.

Neil, a Regional Associate Director at insolvency litigation financing company Manolete Partners Plc, added that in the main, administration numbers were increasing, suggesting directors were seeking early advice, something R3 has been campaigning for since 2020.

“Seeking early advice means there are more businesses that have the potential to be rescued via a sale out of administration – the preferred outcome of an insolvency process for members of the profession, who always seek to rescue a business wherever this is possible.

“If directors are proactive in seeking advice when the first signs of financial distress present themselves, we could see Creditors' Voluntary Liquidation (CVL) numbers reduce in the medium-term and more businesses entering administration in the hope of being rescued through a sale.”

“Despite these issues, there has been some encouraging news for certain key sectors of the economy, with construction output increasing, retail sales rising, albeit slowly, and stronger hospitality sector performance in what has been a challenging year.

“We are now approaching the crucial Christmas trading period and if that doesn’t bring a festive wave of income, we could well see insolvencies continue to rise in the new year.

“Our advice to anyone who is worried about their finances is to seek advice as soon as possible. Don’t wait for the situation to become more serious – if you delay seeking advice, you’ll have fewer potential solutions to your problems, and less time to make a decision about your next step.

“Most R3 members will give potential clients a free consultation so they can learn more about their situation and outline the potential options open to them to improve it.”

The latest Creditsafe data shows a relatively static picture in the number of companies with invoices that had gone past their payment date up slightly from 58,973 in September to 59,177 in October – marginally the second highest figure this year.

Meanwhile, the number of invoices which had gone past their due date in the region has risen from 526,833 in September to 543,395 in October.

The number of start-ups in the South East has increased, from September’s 5,532 to 6,083 in October. April’s 8,050 remain the highest monthly start-up figure since December 2021.

Creditsafe is a multinational business intelligence provider with services including company credit scores and credit report information.