A surge in business distress and bankruptcies is looming on the horizon, especially within the retail industry, due to a perfect storm of factors. Rising costs, supply chain issues, staffing shortages, and the discontinuation of government support for businesses are all contributing to the mounting difficulties faced by companies. Experts and data from the Office for National Statistics (ONS) corroborate these concerns, as highlighted by insights from FRP Advisory. The government’s recovery loan scheme, which has provided an 80% guarantee on debts up to £10 million, is set to expire this month, which could further exacerbate the challenges faced by struggling companies.
Insolvency and restructuring specialists are bracing themselves for a substantial increase in their workload, with the retail, hospitality, and construction sectors most at risk. The first quarter of this year already witnessed a staggering 25% rise in UK business closures compared to the previous year, amounting to approximately 137,000 closures, according to the ONS. Moreover, England and Wales saw nearly 5,000 voluntary insolvencies, marking the highest level recorded since the Insolvency Service began its quarterly survey 62 years ago. FRP Advisory’s CEO, Geoff Rowley, singled out the retail and hospitality industries as particularly vulnerable to the impending crisis.
As autumn approaches, consumers are expected to tighten their belts, especially with the anticipated increase in energy bills come October. This is likely to create a greater need for companies to restructure and result in a surge of insolvencies as the COVID-19 support measures wind down. Although the exact timing remains uncertain, Rowley predicts that the most significant impact will be felt during the autumn season.
This wave of insolvencies poses a significant threat to various sectors and could potentially lead to substantial job losses and economic instability. It is essential for businesses to proactively anticipate these challenges and seek professional advice and support to navigate these turbulent times. As government assistance draws to a close, companies must take the initiative to address their financial and operational issues, heightening their chances of survival. By actively restructuring and adapting their business models, companies may be able to mitigate the potential damage caused by the impending wave of insolvencies.
In conclusion, a combination of rising costs, supply chain disruptions, staffing shortages, and the withdrawal of government support is set to unleash a wave of insolvencies, with the retail industry bearing the brunt of the impact. Businesses must prepare themselves for these challenges and seek professional guidance to ensure their survival in this increasingly uncertain economic climate.
Useful Links:
1. Redundancy Rights in the UK
2. Contact ACAS for Employment Advice
