‘Dramatic’ rise in court action fuelling insolvency concerns

There has been a 139% rise in CCJ’s during Q3 2021 as businesses resort to using the courts to recover debts, according to the latest red flag research for Q3 2021 from Begbies Traynor, which monitors the financial health of UK businesses.

The research also revealed 562,550 businesses in “significant financial distress”, with a 17% rise in “more serious critical business distress” in the past quarter.

According to the firm, CCJ’s are often a “bellwether” for future insolvency and the latest data shows there were 9,101 CCJs lodged against companies during Q3 2020, rising to 21,769 during Q3 2021.

The acceleration in CCJ’s was also evident between Q2 and Q3 2021 with a 51% increase.

Begbies Traynor said the latest official figures show that court activity is picking up as creditors become “more aggressive” in chasing debts.

Ric Traynor, executive chairman of Begbies Traynor Group plc, said: “Companies are taking a tougher line to recover debts, as evidenced by the recent rise in insolvency levels. More worrying has been the 44% rise in small business defaults for loans to corporations as published in the BOE’s latest credit conditions survey.

“Firstly, there is real concern amongst many SME directors about their ability to pay back Government backed bounce back loans with many directors exploring short to medium term insolvency options.”

He added: “Secondly many directors say that HMRC is taking an increasingly aggressive line in chasing debts, particularly those who have defaulted on time to pay arrangements and thirdly many businesses are coming under considerable pressure from landlords chasing debts.

“These risks combined with the withdrawal of government support measures and
protection will undoubtedly see an acceleration in insolvency rates into 2022.”