Warning over false sense of security

BUSINESSES are developing a false sense of security, according to R3.

The insolvency and restructuring trade body said Government coronavirus support measures have “delayed the financial pain of the pandemic” — and challenges are coming.

The warning follows the latest insolvency statistics for England Wales, which reported nearly 2,400 corporate insolvencies in the first three months of 2021.

This is the lowest quarterly total on record, and has fallen by more than 20% compared to the fourth quarter of 2020 (3,053 insolvencies).

The latest figure is nearly 40% lower than this time last year, too.

Garry Lee, chair of R3’s Southern and Thames Valley region, said the fall in corporate insolvencies has been driven by the pandemic.

“It’s clear Government’s support measures are still helping to keep businesses going, but they have pushed back rather than prevented the financial pain of the pandemic from translating into a sharp, sustained increase in corporate insolvencies,” he said.

“A drop in corporate insolvencies of this scale during an economic climate like this suggests that insolvencies are likely to rise.

“It is important that businesses do not become complacent and instead face the challenges in the coming months as covid restrictions lift and government support is expected to end.”

Now, R3 is urging Berkshire’s businesses to keep a “careful eye” on their cash flow levels to avoid overtrading, plan for a sustainable reopening, and for when support measures end.

Mr Lee said some company directors have delayed planning ahead, but need to be ready for when the furlough scheme winds up in September.

“We urge anyone who is worried about their business’s finances to seek advice from a qualified, regulated advisor as soon as they become concerned,” he added.

“Doing so will give them more options to turn their financial situation around, and more time to take a considered decision about the best approach for their business.”

The latest Government also reported a 5.3% drop in individual insolvencies from the final quarter of 2020

(30,769) to the first quarter of 2021 (28,936).