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Expert warns of rise in insolvencies
CORPORATE and personal insolvencies could increase over the next nine months, an expert has warned.
James Stares, chairman of the Southern Committee of R3, the trade body for insolvency professionals, fears Hampshire’s shops, pubs, and restaurants could bear the brunt as the economic recovery strengthens.
The number of corporate insolvencies will increase as businesses are exposed to new stresses and strains, drained cash reserves, and impatient creditors as the economy looks to strengthen over the next nine months, he added.
Mr Stares, who has worked on high-profile insolvencies such as the Dudman Group, Huelin Renouf Shipping, and Graham Wood Structural Limited, said: “As the economy starts to pick up, businesses are exposed to new stresses and strains: cash reserves begin to run out; creditors can become less patient; businesses can grow faster than cash flow or supply chains can cope with; and the consequences of failing to invest during a recession can be felt.
“It’s likely that Hampshire’s high streets will feel this the most, with retailers and pubs and restaurants among the hardest hit.
“Our recent research has shown that while the percentage of retail businesses in the South East at risk of failure has gone down slightly, almost a third (32 per cent) have a higher than normal risk of failure. Similarly, 40 per cent of restaurants and 40 per cent of pubs in the region have a heightened risk.
“While it would be bad news to see yet more shops, pubs and restaurants close across the county, a rise in corporate insolvencies could be seen as confirmation that economic recovery is really under way at last.”
Corporate insolvencies have been much lower than expected since the recession due to low interest rates, the failure of the recovery to gain momentum quickly, and unusual levels of creditor forbearance.
But the region has still seen a number of high profile insolvencies over the past year, including Denizen, the contractor behind the Ageas Bowl, Wickham Vineyards and Hollybourne Hotels.
Mr Stares added: “For the past few years, the first quarter of the year has been a tough one for businesses.
“For those businesses reliant on a good Christmas period, failure to hit sales targets can lead to problems in January and February. Similarly, with the end of some businesses’ financial year approaching at the end of the quarter, financial difficulties may have come to a head.”
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