New research from Begbies Traynor “Red Flag Alert” has revealed stark figures, signalling a 19% year on year increase in the number of companies in critical financial stress, with 1,891 companies affected in Q1 2022.

The industry most at risk is construction. The construction industry has felt the brunt of the late payment problem with 65% of contractors have experienced slower payments since the start of the pandemic. 26% of firms in the construction industry say it now takes their customers more than 30 days to settle outstanding invoices, with debtors mostly blaming late payments from their own customers and cashflow pressures.

Late payments are a huge problem for businesses across all industries in the UK with 440,000 businesses at risk of failing due to being paid late and is contributing to the current number of businesses in deep financial trouble.

Rising insolvencies

The findings in Begbies Traynor’s report shows County Court Judgements (CCJs) are up 157% to 22,552 in just the first quarter of 2022 and March seen the highest number in a single month for five years. These are particularly worrying stats as CCJs are a clear warning sign of future insolvencies.  

We have previously written about corporate insolvencies continuing to rise and now we’ve reached crisis levels.

The number of company insolvencies in England and Wales rocketed 168% in Q1 2022 from Q4 2021 and 112% year-on-year.

We’re seeing a similar picture in Scotland with corporate insolvencies more than doubling in Q1 2022 and insolvencies in Northern Ireland have trebled in the same period.

Creditor voluntary liquidations (CVLs) accounted for 87% of these company insolvencies, more than doubling and reaching the highest quarterly number since 1960.

This record-breaking number of CVLs clearly indicate that there is a swathe of businesses struggling with late payment and the cashflow problems that come with it.  More than two-thirds (65%) of contractors have experienced slower payments since the start of the pandemic and more than 440,000 could be forced to close as a result of the late payment crisis.

A huge rise in company insolvencies have been on the horizon for over a year now. Fiscal support brought in to help companies combat the impact of the pandemic kept companies afloat who would have failed regardless of the pandemic, and this support effectively kept them on life-support. There was also a ban on winding up petitions, protecting businesses from insolvencies, but also creating a backlog when these restrictions were lifted.

Now this support has came to an end, the ban on winding up petitions has been lifted and bounce back loans, CBILs and CLBILs are being repaid, we’re now seeing the backlog of insolvencies come to a head.  

Another huge factor contributing to this rise in insolvencies is inflation, the rising cost of living and rising interest rates, all affecting struggling businesses.

Will this impact your cashflow?

Sharp rises in company insolvencies like we’re seeing now should be sounding alarm bells for any business owner.

They indicate that the likelihood of late payments and defaults are going to increase dramatically, putting our own businesses at risk and hampering cashflow.

The threat goes beyond your customer. It concerns the whole supply chain, as one instance of a late payment or default can send ripples throughout the supply chain as companies rely on their own customers paying them to pay invoices to their own suppliers.  

The credit cycle can be extremely fragile, so it pays to always remain vigilant when it comes to protecting your cashflow.

How Darcey Quigley & Co can ensure your invoices are paid

Darcey Quigley & Co have collected billions of pounds worth of unpaid invoices from all over the globe.

Our friendly team of professional credit management consultants have decades of industry experience and are always on hand to offer advice on credit management, unpaid invoices, late payment interest and how to recover overdue payment.

Whether you need outstanding invoices collected quickly with no fuss or need to outsource your credit control to a team of professionals, our team are on hand to help you. Schedule a call with our team at a time that suits you or call us on 01698 821 468.

You are entitled to late payment interest and compensation

If you are waiting on overdue invoices being paid then you are entitled to claim late payment interest and compensation.

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