Wave of insolvencies expected and retail to feel the pain

By

Nigel TAYLOR

Published
Jun 6, 2022

Beware: a major rise in corporate distress and bankruptcies, especially in retail, is looming, experts warn.

A mix of rising costs, supply chain problems, staff shortages and the end of government support for businesses could trigger a wave of failures this autumn, the Telegraph reported, citing Office for National Statistics (ONS) figures and comment from FRP Advisory.
 
The government’s recovery loan scheme, which offers an 80% guarantee on debt up to £10 million, ends this month and could trigger tougher times for struggling firms.

Insolvency and restructuring specialists are expecting to be extra busy later this year as the retail, hospitality and construction sectors in particular find their problems mounting.
 
In Q1, around 137,000 UK businesses shut down, a jump of almost 25% on the year, the ONS said.
 
There were also nearly 5,000 voluntary insolvencies in England and Wales – the highest level since the Insolvency Service launched its quarterly survey 62 years ago.
 
Geoff Rowley, chief executive of restructuring firm FRP Advisory, which has worked on the administrations of Debenhams, told The Telegraph he believes the crisis in retail and hospitality could be particularly acute. 
 
“Consumers will be looking to tighten their belts in the autumn, especially when energy bills rise again in October. You would expect to see an increase in the need for companies to restructure and an uptick in insolvencies as Covid support ends and the year goes on.” 
 
He warned of a “degree of uncertainty” about when an uptick in activity will occur, but anticipates “the real pain [will] be felt during the autumn.”