Warning that thousands of businesses are on the brink of collapse

0 6

Stock image of a businesswoman looking at the phone

Fears are growing that 2023 could see a spate of corporate bankruptcies as the cost of living crisis continues.

The number of firms on the brink of bankruptcy rose by more than a third towards the end of last year, said bankruptcy firm Begbies Traynor.

This number is expected to increase due to higher costs and reduced consumer spending.

Paul Jones, co-founder of the brewery Cloudwater Brew, said the pressure felt like a “never-ending nightmare”.

Julie Palmer, partner at Begbies Traynor, said they were getting more and more calls from business owners like Mr Jones worried about going ahead.

‘survival mode’

Paul Jones says he feels continuing his business is either not possible or not worth it

Mr Jones said his Manchester-based company has been in survival mode since March 2020, with high costs, debt, low consumer confidence and post-Brexit business problems weighing on the business.

“The costs to me were pretty grim,” he said. “I have a heart condition due to stress and I constantly feel at the limit of what I can personally handle.”

His thoughts are to close his shop “probably once a month from 2020,” he said.

“I feel that it is either not possible or not worth continuing,” he said. “We will continue. What more can we do?”

However, he is still optimistic about business prospects in 2023.

Financial hardship

Begbies Traynor said the number of companies in critical financial difficulty increased by 36% in the last three months of 2022.

A company is in critical financial difficulty if it has more than £5,000 in district court judgments or winding up petitions against it.

The number of district court judgments served against companies during the same period increased by 52% compared to 2021.

Ms Palmer said low interest rates and credit had helped businesses so far. In the pandemic, the Covid credit and a longer time for paying tax meant that support continued.

“[The support] everything seems to be ending at the same time, and there’s really nothing on the horizon to replace them,” she said.

A backlog in bankruptcy courts due to Covid has also delayed some company bankruptcies.

“The courts were closed for business so no one could take recovery action against defaulters and we are seeing those cases being enforced now,” she said.

Chef Mary-Ellen McTague had to close her restaurant last year

This cocktail of challenges has already proved fatal for some.

Chef Mary-Ellen McTague founded The Creameries restaurant in Manchester in 2018. It received rave reviews and traded well until the pandemic hit the following year and business never fully recovered.

High energy costs were the last straw. She had to close the restaurant in September last year.

“It became obvious that no matter how hard I worked, how much I tried, how many different tactics we tried to reverse it, we were never going to get enough customers through the door to make it work. And that was a terrible moment,” Ms. McTague said.

She said running a business in such a difficult time took a tremendous emotional toll.

“I think it can be a really lonely experience to be in that position,” she said.

“When you are the leader of a small business, you have close relationships with your employees, with your suppliers. And you don’t want to upset anyone, so you don’t necessarily talk about it with your friends, family or even your significant other,” she added.

“You don’t want to upset your children. There are many who try to keep worries away from others, which means that you carry them inside you.

“There’s still a lot of stigma and that sense of shame that things aren’t working, even if it’s completely out of your hands.”

She admitted that she had mixed feelings when she finally had to close the shop

“When you get to the point where you see what’s going on and you can’t do better, there’s definitely a sense of relief afterwards.”

“Small Investment”

NatWest boss Alison Rose said that while Britain’s biggest corporate lender has yet to see widespread corporate failures, she is concerned that companies are not, or are not confident enough, about investing in the future .

“Thanks to the very low level of business confidence, we see very little investment. This is a real concern for me because it will hamper future growth.”

But there is also reason for optimism in 2023, she said.

“If you think we’ve had a global pandemic, the end of low interest rates, war in Europe, huge price increases – what we’ve seen is incredible resilience in UK business,” she said.

“We also have a full job, which is really positive. We are seeing a record number of startups and banks like ours in a strong position to support customers. So it’s a tough environment, but we should never forget how resilient the business owners were.”

Banner that says “Contact Us”

Are you affected by the topics discussed here? Share your experiences via email [email protected].

Please provide a contact number if you are willing to speak to a BBC journalist. You can also get in touch with us in the following ways:

If you’re reading this page and can’t see the form, you need to visit the mobile version of the BBC website to submit your question or comment, or you can email us at [email protected] Please include your name, age and place of residence with each submission.

Source

Leave A Reply

Your email address will not be published.