Lauren Hartigan-Pritchard, head of restructuring and insolvency at Higgs LLPCompany insolvencies in manufacturing could hit record highs this year, a legal expert has warned. A total of 147 manufacturing companies entered insolvency in February this year — up from 127 in February last year and 48 in the same month in 2021.
Lauren Hartigan-Pritchard, head of restructuring and insolvency at award-winning law firm
Higgs LLP, said: “Company insolvencies are at record levels across the board and unfortunately manufacturing is high on the list. The circumstances for the rise in insolvencies varies sector-by-sector as each industry has its own challenges. We are witnessing a perfect storm of events that is making life very difficult for many businesses right across the country. Unless the economic picture improves, high levels of business failures are guaranteed.”
The latest statistics show there were 2,457 company insolvencies in March this year — a 16% rise on the same month in 2022. That figure represented a record since insolvency figures began being recorded three years ago. Compulsory liquidations — including partnership winding-up orders — stood at 288 in March, up 106% year-on-year.
Overall in quarter one, there were 5,747 company insolvencies, 18% higher than in quarter two 2022. The worst-hit sectors, according to the most recent Government statistics for February, were construction (18% of all), motoring (15%), hospitality (14%), administration services (10%) and manufacturing (8%).
Meanwhile, during the financial year 2022/23, 932 directors were disqualified — a 16% increase on 2021/22. Around a half of director disqualifications in 2022/23 (459) included an allegation relating to abuse of the Government’s Covid-19 ‘Bounce Back Loan Scheme’.
Tip of the icebergSuky Mann, principal associate in Higgs’ restructuring and insolvency team, said: “With Government figures suggesting that Bounce Back fraud has resulted in an estimated £3.5 billion in losses, we suspect this is the mere tip of the iceberg in a raft of disqualifications to come in the next 12 months.
“It is not just directors of insolvent companies that have felt the full force of the Insolvency Service. In December 2021 the Rating (coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 gave the Insolvency Service new powers to disqualify directors of dissolved companies.”
Ms Hartigan-Pritchard said early action was essential for any business worried either about potential insolvency or any director facing investigation by the Insolvency Service. “There are often a whole host of restructuring options available if businesses seek advice at an early stage. Unfortunately, 95% of people leave it until it is too late.
“If a business is struggling week to week, we can look at re-financing options. We can talk about improving accountancy practices or examine a particular overhead which has increased and is causing problems. Our team can offer advice on profitability or look at options such as administration. If a business is in a precarious position, it does not always have to end in insolvency.”