Sharp rise in companies going bust — but East firms continue to adapt

R3 Eastern chairman Alistair Bacon

Ipswich solicitor Alistair Bacon says while insolvencies are on the rise there are reasons for optimism - Credit: Alistair Bacon

The economic damage caused by the pandemic has yet to be fully felt as company collapses rose 45% month-on-month, an Ipswich-based insolvency expert has warned.

But businesses in the East of England are continuing to adapt and evolve, said solicitor Alistair Bacon who is chairman of the eastern branch of insolvency experts’ trade body R3.

Mr Bacon – who is founding principal and managing director of Ipswich law firm AMB Law – warned firms to keep on top of their cashflows as they emerge from lockdown.

“The economic damage caused by the pandemic is only now starting to be revealed, as government support has postponed – rather than prevented – the true picture being reflected in insolvency levels,” he said.

“As lockdown restrictions continue to unwind, however, there is some cause to be optimistic. Many local businesses have adapted and reinvented themselves during the pandemic and may now be in a better position for the coming months.

“We may also see consumer spending increase, but companies need to be aware of the risks of over-trading if they don’t have the cashflow needed to cover the full costs of reopening and restocking. It is crucial that directors and owners plan for a sustainable reopening of their businesses.”

Figures published by the government’s Insolvency Service on April 15 show corporate insolvencies in England and Wales rose by 44.8% to 992 in March, compared to 685 in February.

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The rise follows 11 months of relatively low levels of company insolvency procedures as government support cushioned businesses and provided a “vital lifeline” which removed many of the usual causes for seeking financial advice, said R3 Eastern.

Mr Bacon said the ability of local companies to reinvent themselves over the last 12 months was a cause for optimism.

“For those companies continuing to struggle, the sooner advice is sought from a qualified and reputable source, the more potential there is for a solution. Many R3 members offer a free consultation to those who are looking for help with their business’s finances and want to explore their options,” he added.