AN "unprecedented" number of businesses across the north may be heading for insolvency as government support measures begin to be withdrawn, according to Belfast accountancy and advisory firm Baker Tilly Mooney Moore.
And it is thought that, from July 1, some of the insolvency-related rules that had been suspended as a result of the pandemic twill be gradually reintroduced.
The relatively modest number of insolvency cases filed during 2020/21 in Northern Ireland has been largely due to financial assistance provided by the government and the Bank of England.
But these measures have effectively extended the life of businesses that would not have survived under normal economic conditions, thereby creating so-called ‘zombie’ companies.
Darren Bowman, business recovery and insolvency partner at Baker Tilly Mooney Moore, said: “Many firms encountered difficulties during the pandemic, accruing debt and relying on government support measures including 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reality is that many of these businesses may find themselves facing insolvency, as support measures start to be withdrawn.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.”
He said that the most common sign indicating that a business is at risk of financial difficulty 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.
“The pandemic has resulted in many businesses facing financial difficulties for the first time, so it is essential directors are aware of the key warning signs that can lead to real financial problems or even formal insolvency.
“With lockdown easing, 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, and getting the right advice, as soon as possible, is critical,” Darren added.
