The number of companies in the North East suffering late payment from customers has risen for the sixth consecutive month, adding to the economic challenges facing firms.
Analysis by insolvency and restructuring trade body R3 found that 13,503 North East firms were dealing with more than 200,000 overdue invoices, while the number of insolvency-related activities in the region – which includes liquidator appointments, administrator appointments and creditors’ meetings – went up from 70 to 76, a third consecutive month of rises.
The figures are the latest worrying sign for the regional business community, and come amid a number of reports that show businesses are being faced with significant challenges from rising costs, supply chain issues and labour shortages. A number of business groups are calling on the new Prime Minister due to take office next week to make action to support small and medium businesses their first priority due to the unprecedented economic challenges facing most companies.
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R3 North East chair Chris Ferguson, who is head of recovery and insolvency at Gosforth-based RMT Accountants & Business Advisors, said: “Being unable to pay your invoices within the agreed terms is one of the key signs of business distress and, of course, the impact of late payments are not isolated to the company itself. Late payments directly impact cashflow and onward payments to suppliers, and insolvency practitioners regularly deal with cases where suppliers encounter treading issues through no fault of their own.
“Rising utility bills, soaring raw material costs and problems in the supply chain are among a wide range of issues that are contributing to making trading conditions difficult for businesses in many sectors, especially in areas like hospitality and retail where consumers are clearly cutting back their spending, and there’s no real indication that things are going to get much easier in the short-term.
“Problems paying invoices on time should be a real wake-up call for owners and management teams and should prompt them to take steps to address any trading issues, including seeking qualified advice to help implement measures that will support long-term financial sustainability.”
Separately, the British Chambers of Commerce has said it expects the UK to go into recession by the end of the year, with inflation reaching 14% and weak growth expected to continue into 2024.
Alex Veitch, director of policy at the British Chambers of Commerce, said: “Our latest quarterly economic forecast will not be of any comfort to either consumers or businesses. The extreme inflationary pressures already present are only likely to increase as we head towards Christmas; with the UK economy already thought to be in recession. Tackling these pressures must be at the top of the new Prime Minister’s inbox.
“We have revised our projected inflation rate upwards by four percentage-points to a new high of 14%. Inflation is running rampant, and it is not only impacting the cost of doing business, but also the ability of some firms to keep their doors open. In January, the BCC found that 23% of businesses surveyed were looking to scale down or even consider closure in response to rising costs.
“With prices spiralling out of control, they are expected to race ahead of earnings growth by a ratio of 3:1 in Q4 2022. This will undoubtedly impact consumer confidence. Action is needed now, and the BCC has set out a comprehensive plan for Government to provide vital support to firms.”
The Chambers have called on the Government support businesses on energy costs, as well as other measures on reducing taxes and helping ease labour shortages.
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