North East firms are struggling to cope with ‘enormous’ running costs as the latest figures show a sharp month-on-month rise in the corporate insolvencies.

The latest Insolvency Service statistics revealed a 5.5% month-on-month increase from the 1,832 cases of corporate insolvency registered across England and Wales in July 2022 up to the 1,933 cases lodged last month.

The August 2022 figure is 43.4% higher than the number for the same month last year (1,348), which was in turn already 41.6% higher than the number for August 2019.

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The latest increase in corporate insolvencies has been driven by a significant rise in the number of Creditor Voluntary Liquidations (CVLs), a procedure initiated by directors of insolvent firms to close their companies.

Chris Ferguson, head of recovery & insolvency at Gosforth-based RMT Accountants & Business Advisors, said: “Even taking recent government support measures into account, North East firms are facing enormous running cost hikes just as household spending is facing its biggest squeeze in several decades, which delivers yet another blow to business owners who are still trying to recover from the impact to their businesses from the pandemic.

“It is clear that rising supply and energy costs, and the effect these have on margins, are of paramount concern to directors and management teams across the region.”

He says the directors of struggling North East firms need to take urgent steps to tackle any growing financial difficulties.

“These figures are a sobering reminder to both businesses and the government of the scale of the challenge facing the UK economy as we head into the winter months, and reflect the continued toll the sustained economic turbulence is taking on companies across England and Wales.

“The monthly increase in corporate insolvencies, to the third highest set of monthly statistics since January 2019, has mainly been caused by an increase in the number of Creditors’ Voluntary Liquidations, which suggests that directors do not consider that they are able to continue to trade in the current climate, and are choosing to close their businesses instead of pursuing alternative turnaround solutions.

“Accepting that your business needs help can be difficult but acting swiftly to address problems gives access to a much wider range of potential turnaround solutions.”

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