Data experts warn of looming insolvency crisis as Covid19 support measures end

AS businesses and households continue to grapple with the impact of spiralling energy costs, data experts warn that the UK economy is facing a Post Pandemic insolvency crisis as most Covid19 support measures come to an end on 24 March 2022. Data from Red Flag Alert; a business intelligence platform that provides real time analysis of the health of companies by compiling thousands of datasets; highlights that in January 2022, the number of insolvencies recorded in England and Wales was more than double that of January 2021, while the number of company voluntary liquidations had also increased by 34% year on year. UK insolvencies were at an all time low during 2020 and 2021, largely due to the impact of Covid19 business support measures such as the furlough scheme, Coronavirus loans and rent relief. There was also reduced enforcement by the Courts and HMRC during this period, due to lockdown working restrictions. However, as most Covid19 support measures come to an end this month; and with limited further support announced by the Chancellor in the Spring Statement; Red Flag Alert's data suggests the UK could be at the edge of an insolvency precipice. The business forecasts that there will be 25,600 total insolvencies this year, but under their worst case projections, this number could rise to 28,000. This is well ahead of the highest number of insolvencies ever recorded in the UK; 27,000; in 2009, following the financial crisis. The impact is likely to be felt particularly acutely in less advantaged Regions such as the North of England. The North recorded disproportionately high numbers of insolvencies in the last months of 2021, with 548 recorded in October 2021 and 481, in November 2021. By way of context, the total number of UK insolvencies typically hovers at around 1,500 per month, illustrating just how vulnerable the North's economy is to future rises in insolvencies.

Red Flag Alert's Deputy Chairman, Mark Halstead, said:- "Our data indicates a sharp rise in the number of insolvencies. Now that Covid19 support measures are ending, company directors are realising that they face insolvency. What is most alarming is that we are just at the beginning; our data suggests we are facing an unprecedented insolvency crisis, that won't just affect those businesses that become insolvent, but will have ripple effects across the wider economy, potentially even causing some supply chains to collapse. This is because increased insolvencies typically lead to increased unsecured creditor losses. Although a lag in the number of insolvencies being processed through the Courts means we aren't seeing this impact yet, our data provides an early warning sign of problems to come. Unsecured creditors are typically supplier businesses that are owed money on invoices. They are at the back of the queue when it comes to being repaid by administrators and are usually left to absorb 90% of the losses. This could have a huge impact on sectors such as construction and Hospitality, which are already facing an uphill struggle in recovering from the Pandemic and coping with rising energy, rent and materials costs. The data suggests we could be looking at a snowball of insolvencies in 2022 if action isn't taken."

Some of the early warning signs detected by Red Flag Alert include:-

► A 106% rise in the number of county Court judgements (CCJs) being filed in December 2021 compared with December 2020 - this is a sign that creditors are using the Courts to recover debts.

► A substantial increase in the number of winding up petitions (WUPs) submitted; restrictions were placed on WUPs during the Pandemic, but research by HMRC indicates that 150 were submitted between 4 January and 5 February 2022. Although lower than the same period in 2020, this represents a surge compared with 2021.

► Wider economic challenges, including:- rising inflation and interest rates and reduced footfall for Hospitality businesses, that could push many vulnerable firms into insolvency.

Dr Nicola Headlam, Red Flag Alert's Chief Economist and Head of Public Sector, and former Head of the Northern Powerhouse within Government, commented:- "Quite rightly the focus currently is on the cost of living crisis for individuals and the fact that many households could be pushed into poverty as a result. However, the looming insolvency crisis which our data suggests is on the cards could compound these issues even further. Businesses becoming insolvent often means people becoming unemployed, so it's vital that public sector decision makers look at the bigger picture of what is actually happening in the economy and use data to inform how they respond. The Chancellor announced very little in the Spring Statement that could stem the rise in insolvencies, however there are actions that local authorities, LEPs and others can take if they are armed with the right information. Given the significant challenges the economy is facing, public and private sectors will have to fight for every pound of growth and that means being forensic in how they identify growth opportunities and target support. Firm level data like ours can help public bodies identify which firms are most likely to grow and which are likely to be most vulnerable and uncover trends that are hidden by traditional macroeconomic measures. This can help them target growth support to the companies that are most likely to grow, create jobs and bolster supply chains, and put in place measures such as skills support and retraining for employees of businesses, or even whole sectors, that are at risk."

Red Flag Alert collects thousands of data points every day, which it turns into powerful insights that help clients find their ideal customers and check the financial health of suppliers and other businesses. Full details of the data provided by Red Flag Alert's business intelligence platform is available in its Big Bang Data Report.

Touchscreen ban - Learners CAN get fined for new mobile phone highway code offences

30% of Brits are unaware that you can get points on a Provisional License. It's already illegal to use your phone to make a call or text while driving, but new high way code rules introduced on Friday, 25 March 2022, ban any use of a touch screen device, including:- streaming music and playing games. This means that selecting a song or flicking through a playlist could land you with a ₤200 fine and 6 points on your license. But research from learner driver insurance provider, Veygo, found 33.33% of Brits are unaware that it's possible to accrue penalty points while driving with a provisional license. DVLA data requested by Veygo, reveals that 74,104 provisional license holders had points on their license in April 2021.

David Roberts, Chief Product Officer at Veygo says:- "Any distraction while driving is a big danger, and learner drivers on a provisional license aren't exempt from points on their license or even fines. The changes to the Highway Code make the rules much clearer cut when it comes to using your phone in the car, and are ultimately there to keep us all safe. The new rules are a welcome reminder for learners to be as vigilant while learning, whether practicing with an instructor, with friends and family, as they are once they've passed their test."

Exceptions to using a device held in your hand are as follows:-

►  You need to call eather:- 999 or 112, in an emergency, and it's unsafe or impractical to stop.

►  You're safely parked.

►  You're making a contactless payment in a vehicle that is not moving, for example at a drive through restaurant.

►  You're using the device to park your vehicle remotely.

You can also use mobile devices if you are using a hands free system, as long as you do not hold them at any time during usage. Hands free access means using, for example:-

►  A Bluetooth headset.

►  Voice command.

►  A dashboard holder or mat.

►  A windscreen mount.

►  A built in SatNav.

The full rules can be found online at:- Gov.UK.