Company insolvencies are forecast to rise sharply in the UK over the coming months as government support measures are unravelled.
Begbies Traynor, the insolvency specialist, warned businesses were facing the “double whammy” of accruing liabilities and the withdrawal of state support schemes.
“I expect we’ll see numbers of insolvencies in excess of what we saw in 2008,” said group executive chairman Ric Traynor, comparing the recession caused by the pandemic with the financial crash.
“Many companies have essentially gone into hibernation, pulling down the shutters, taking the phone off the hook and not responding to creditors,” added Mr Traynor.
“But those liabilities are still accruing, and we’re going to have the double whammy of government support schemes being pulled . . . So we expect to see a spike [in insolvencies] in the second half of the year and running into next year.”
There was an increase in the number of company insolvencies in July as businesses began to confront their balance sheets after months of mothballed activity during lockdown, according to Begbies.
“We’ve certainly seen in July an increase in insolvency activity,” said Mr Traynor, adding that businesses were going insolvent across the board, but it was most prevalent in construction, bars, restaurants and retail.
Fashion retailers Debenhams, Monsoon, Quiz and TM Lewin, shopping centre owner Intu and furniture stores Harveys and Bensons for Beds have all launched insolvency proceedings.
Mr Traynor’s insolvency warning came as the company announced full-year results.
It reported revenue growth of 17 per cent to £70.5m for the year ending on April 30, despite a “quite material” fall in insolvency activity during lockdown as companies began to mothball.
Pre-tax profit dropped to £2.9m from £3.3m a year earlier, partly because of acquisition costs.
Mr Traynor said Begbies would continue to expand its employee numbers, and the majority of new recruits would join the insolvency division to help handle the expected spike in numbers.