The traditional Christmas boost may not be enough to save many North East businesses from failure, an insolvency expert has warned.
Chris Ferguson, North East chair of insolvency and restructuring trade body R3, was speaking after the latest Insolvency Service data revealed a 15.7% month-on-month increase in corporate insolvencies. The figures were also 38.2% higher than the number of business failures reported this time last year.
Mr Ferguson, who is head of recovery & insolvency at Gosforth-based RMT Accountants & Business Advisors, said: “The run-up to Christmas is often the most important part of the trading year for many North East businesses, especially those in the retail and hospitality sectors, that can tip the balance between a good and bad trading year. Although we are now entering the busy festive season, with the added bonus of a men’s World Cup, the jury is still very much out on whether the pre-Christmas trading period will lead to the traditional boom many businesses need.
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“Money worries continue to be front of mind for many people as the costs of food, fuel and energy continue to rise and real wages fall. Many people aren’t sure how expensive their energy bills will be this year and are likely be reluctant to spend money they feel they may otherwise need to cover rising living costs.
“Business owners themselves will also be worried about the economic conditions that are affecting their particular sector. The prospect of an imminent and prolonged recession will raise the challenge of how they will meet rising costs, including increasing employee pay expectations as well as covering their own living expenses.”
As well as the big rise in corporate insolvencies, personal insolvencies across England and Wales also showed a month-on-month increase, rising by 4.9% to 10,514 in October, and were 8.6% higher than October 2021’s figure.
The figures come as the UK is widely believed to be heading into recession, with a number of national and international bodies warning of tough times ahead for families and businesses.
New forecasts from the Organisation for Economic Co-operation and Development (OECD) predict the UK economy will contract more than any of the world’s seven most advanced nations next year as Britain suffers from painful inflation exacerbated by worker shortages and “untargeted” energy support.
Elsewhere, the Office for Budget Responsibility (OBR) has warned MPs that “2023 is going to be a very difficult year” for households as bills continue to rise.
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