A rise in the number of creditors taking court action to recover debts has led to fears of a surge in insolvencies in the New Year.
There were 21,764 County Court Judgments lodged against companies in the three months to the end of September – a rise of 51% on the previous quarter.
Between July and September, 155 companies went into administration or receivership, up 26% on the previous quarter. The construction and energy sectors were the worst hit.
Restructuring firm Begbies Traynor said the figures suggested there could be a sharp rise in insolvencies early next year.
Ric Traynor, executive chairman of Begbies Traynor, said: “We’re concerned that trading conditions will deteriorate for many companies as supply chain issues affect output and input costs continue their upward trajectory.”
Traynor added that many directors of small and medium-sized companies were concerned about their ability to pay back government bounce back loans, which could put extra pressure on businesses already struggling from the effects of the Covid pandemic, Brexit and labour shortages.
Meanwhile, the Times reports that businesses fear HM Revenue & Customs is “taking an increasingly aggressive line in chasing debts, particularly those who have defaulted on time-to-pay arrangements”.
This too could add to the pressure and possibly push some struggling companies over the edge.
Businesses are advised to keep a tight rein on credit control and to be prepared to take early action to recover unpaid invoices. Delay could make it harder to ensure payment from companies that slide further and further into debt, and in some cases, cease trading.
Please contact us if you would like advice about debt collection and credit control.