With inflation beginning to run rampant, energy costs skyrocketing and proving a real drain on business finances, the fact that for many companies it is time to pay back some of the Covid recovery loans they used during the pandemic cannot have come at a worse time. And this is why we are seeing four times more insolvencies than the same time last year, which is a very worrying trend.
Very Little Capital Left To Work With
With regard to the Covid loans, the BounceBack and CIBLS varieties now need to be repaid and these repayments mean that businesses have very little capital left to work with to run their business, leading to a number of company insolvencies over the course of the last 3 months (56 insolvencies to be exact).
Talking about this subject to the Irish News one analyst is quoted as saying:
“Many businesses which were propped up by government grants and support are now running out of money and are having to call it a day.
“Expect the data to worsen, potentially materially, during the second quarter. For many businesses, the current headwinds are a bridge too far.”
And other data, from insolvency specialists Begbies Traynor, is showing over 8,500 businesses in Northern Ireland have been in some form of financial distress at the start of this year.
We Face The Most Severe Energy Crisis Since The 70`s
Lawrence O’Hara, who heads Begbies Traynor’s Northern Ireland operation, is quoted in the same article, saying:
“While many will be relieved to see that early business distress has not risen in the last quarter, we are concerned that this might give business owners a false sense of security and distract from the huge ongoing challenges.
“As beleaguered businesses reel from two years of Covid disruption, reserves are likely to be running low as we face the most severe energy crisis since the 1970s.
“And this, combined with the worsening situation in Ukraine and further lockdowns in China adding to supply chain problems, means that the economic landscape is likely to be extremely challenging in the short-term.”
If you own or manage a business, and you are finding it hard to cope with all the challenges that you are facing at this present moment in time, you may benefit from some advice from our accountancy team. So please ring our office at the earliest opportunity by calling 028 3752 2909.