South East sees spike in insolvency-related activity

Insolvency-related activity in the south east has risen sharply in recent months and is expected to increase - at least in the short term.

That's the view of R3, the UK's insolvency and restructuring trade body, which has been mulling over data from Creditsafe, which showed an increase in insolvency-related activity from 173 in September this year to 293 in October - the highest figure since March 2022.

The number for the south east region is the fifth highest in the UK, behind Greater London (614), the North West (439), East Anglia (417) and Yorkshire and Humberside (309).

Neil Stewart, chairman of R3’s Southern and Thames Valley region and regional associate director at insolvency litigation financing company Manolete Partners Plc, said the uplift in October indicated that the business climate remained difficult as firms faced a "multitude of problems".

"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," he said.

"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," he added.

Stewart said that announcements made by new Chancellor Rachel Reeves had caused "no little consternation".

"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," he said.

As well as the increase in employers' NI contributions, inheritance tax changes were another area of concern, noted Stewart.

"However, there is some positive news for business," he continued.

"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," he added.

In addition, there had been some encouraging news for certain key sectors, he said, with construction output increasing, retail sales rising, albeit slowly, and stronger hospitality sector performance in what has been a challenging year.

Stewart also highlighted that the increase in administration numbers suggested that 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," he said.

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

"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," said Stewart.

Creditsafe is a multinational business intelligence provider. Its services include company credit scores and credit report information.