The number of companies filing for administration across the North East and Yorkshire soared by more than a third last year as rising inflation, weaker trade and geopolitical uncertainty piled the pressure on businesses.
Interpath Advisory has analysed notices in The Gazette, which showed that 154 companies across the two regions collapsed into administration in 2022, up from 115 companies in 2021. The rise represents a 34% increase on 2021, though it is still well below pre-pandemic levels, when 211 collapsed in 2018.
The regional figures mirrors the UK picture, in which 1,039 companies fell into administration, up from 710 companies in 2021, but also not back at pre-pandemic levels of 1,422 in 2019 and 1,337 in 2018. James Lumb, managing director and head of Interpath’s team in the North East, said the outlook is uncertain and that he expects to see more administrations as markets tighten.
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He said: “The second half of 2022 came as a blow for many businesses which had been hoping for a year of respite following two years’ of disruption caused by the pandemic. Instead, spiralling inflation, rising interest rates, faltering consumer confidence, political turbulence and weaker cross-border trade served to pile on even more pressure.
“And despite new figures released by the Office for National Statistics confirming that the UK economy grew by 0.1 % in November, the longer-term outlook remains highly uncertain.”
Interpath’s analysis showed that the rising number of insolvencies was seen across a range of sectors, with retail and casual dining businesses experiencing particular challenges as the year drew to a close. Retailers benefited from a boom in sales in the crucial month of December, rising by 6.9% compared with a year earlier, which the British Retail Consortium attributes to high inflation pushing up the value of goods being sold, masking weaker sales volumes.
Mr Lumb added: “Businesses in the retail and casual dining space continue to face one challenge after another - from rising input costs and interest rate rises, to supply chain disruption and staff shortages, not forgetting falling consumer spend due to the spiralling cost of living. Many are also finding that they have surplus stock on their hands, as demand has dampened and inventory levels have continued to rise.
Looking ahead, Mr Lumb said the pandemic had tested the crisis handling skills of management teams to their limits and that he was now seeing lenders become more selective, increasing scrutiny on borrowers’ ability to service debt.
He added: “As the market starts to tighten, we expect to see more administrations, and increased use of the new restructuring tools including moratoriums and restructuring plans. These will provide those financiers with a risk appetite the ability to buy into and turn around enterprises caught out by the challenging landscape.”
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