Experts warn of early warning signs of unprecedented number of insolvencies in Northern Ireland
Northern Ireland may be on the brink of record number of insolvency cases, experts warn
Leading accountancy and advisory firm, Baker Tilly Mooney Moore, has warned that an unprecedented number of businesses throughout Northern Ireland could be heading for insolvency, as Government support measures begin to be withdrawn.
It is expected that, from July 1 onwards, the UK government will gradually reintroduce some of the insolvency-related rules that it had suspended as a result of the pandemic.
Northern Ireland has seen a relatively modest number of insolvency cases filed during 2020/21 so far, largely due to financial assistance provided by the government and the Bank of England to help businesses survive the pandemic. These measures may have extended the life of businesses that would not have survived under normal economic conditions, thereby creating so-called ‘zombie’ companies.
Darren Bowman, (pictured) Business Recovery and Insolvency Partner at Baker Tilly Mooney Moore, said: “Many businesses across Northern Ireland encountered difficulties during the pandemic, accruing debt and relying on government support measures to stay solvent. These may have included the furlough scheme and derogations from usual insolvency-related rules and procedures.
“The unfortunate reality is that many of these businesses may find themselves facing insolvency, as support measures start to be withdrawn. It is essential for businesses to monitor their own performance and be aware of the early indicators of a pending insolvency. It is also critically important that businesses monitor their trading relationships to forecast any challenges for supply chain partners.”
Darren, who heads up one of Northern Ireland’s biggest specialist insolvency teams, advised there are a number of signs that may indicate that a business is at risk of financial difficulty. The most common of these is being unable to pay HMRC liabilities when they are due and struggling to pay landlords, suppliers, staff, and Directors being unable to pay themselves.
Darren continues: “The pandemic has resulted in many businesses facing financial difficulties for the first time. It is essential that Directors are aware of the key warning signs that can lead to real financial problems, or even formal insolvency.
With the current easing of lockdown, many businesses may need additional lending to finance reopening, intensifying financial pressures on already distressed businesses, especially if banks refuse loans or require current facilities to be reduced.”
Getting the right advice, as soon as possible, is critical according to Darren:
“Directors have a responsibility to minimise losses to creditors, so we would always advocate seeking professional advice sooner rather than later. Where businesses are underperforming, or are financially stressed, a good professional partner can implement solutions that will preserve business value and restore viability for owners and stakeholders. Prompt action is essential to enable a business to establish if appropriate restructuring, rescue and turnaround techniques such as a Company Voluntary Arrangement, administration or refinance are viable options.”
For expert advice on Insolvency or to find out more about Baker Tilly Mooney Moore, call: 028 9032 3466 or visit www.bakertillymooneymoore.co.uk