Begbies Traynor forecasts ongoing “elevated” insolvency levels as rising interest rates and funding demands strain company finances.
The Aim-listed restructuring specialist anticipates persistent corporate distress into next year following a 12% increase in insolvencies, reaching 25,391 by April 30.
Revenue for Begbies Traynor climbed by 12% from £121.8 million to £136.7 million for the year ending April 30. Adjusted earnings before interest, tax, depreciation, and amortisation rose by 7%, from £26.6 million to £28.5 million, while profit before tax fell by 3.3% to £5.8 million.
Ric Traynor, (pictured) executive chairman of Begbies Traynor, stated, “Insolvency activity across the UK remains at elevated levels, with sustained higher interest rates continuing to impact corporate stress levels.”
Traynor added that the higher insolvency rates are expected to persist next year as businesses face “working capital and other funding challenges” amid economic recovery.
The Body Shop, Cazoo, Ted Baker, and Matchesfashion are among the companies that have succumbed to insolvency this year due to the challenging higher-rate environment. The Bank of England has raised the base rate to a 16-year peak of 5.25% to combat inflation, and while rates are expected to decrease this year, businesses will still contend with elevated borrowing costs.
Begbies Traynor’s revenue from its business recovery operations increased by 13%, from £70.6 million to £79.5 million, whereas revenue from its advisory services dropped by 2.2%, from £19.1 million to £16.9 million.
The firm has handled several significant insolvency cases throughout the financial year, including the administrations of Worcester Rugby Club and Paperchase, as well as the receivership of Britishvolt’s electric battery site in Northumberland. Additionally, Begbies Traynor has been appointed to manage the administrations of Fortress Capital and Thought Fashion.
Tim Symes, Partner and Insolvency and Asset Recovery lawyer at UK law firm Stewarts echoed Traynor’s comments, saying: “It’s right to say that things will continue to remain tough for the smaller and less resilient companies, which represent the vast majority of the on-going corporate insolvencies. However, we will continue to see these numbers abate as interest rates begin to fall, control of inflation is fully regained and consumer confidence returns.”