It’s been a tough few years, on the back of COVID-19, SMEs have had to face a lot of economic pressure. The latest statistics show a 9% jump in company insolvencies from Q1 2023 – and 13% from the same quarter in 2022. Even local Government is not immune to financial pressures with Birmingham City Council filing a Section 114 notice after mounting debts resulting from equal pay claims and problems with their IT system. The war in Ukraine, rising energy costs, labour shortages and the cost of living impacting consumer spending.
2023 started stronger than expected, but with several economic indicators now flashing red and the global outlook darkening, the British Chamber of Commerce expects business investment to fall by 0.1% in 2024 – a contraction of 0.7 percentage points and then bounce back to 1.2% in 2025.
The Insolvency Service figures for Q3 (July to September 2023) show that the number of company insolvencies were at their highest since Q2 2009.
The British Chamber of Commerce’s latest Quarterly Economic Forecast upgraded its 2023 GDP prediction to 0.4% from 0.3% in the previous forecast, but GDP growth in both 2024 and 2025 are downgraded from 0.6% and 1.0% to 0.3% and 0.7% respectively.
Interest rates are set to peak at 5.5% and fall back only slightly (to 5.25%) next year, before dropping to 4.5% in 2025, which is still considerably above average for the past 10 years. Inflation will slow to 5.0% in Q4 2023 but will then inch down to the 2% target by Q4 2025.
Imports, exports and general government spending are all expected to decline in 2023. Imports by 4.7% and exports by 4.3% due to weak global demand and the aftershocks of Brexit. Further regulatory changes at both the UK and EU borders are also likely to weigh on trade flows.
Charles Brook, Corporate Recovery Director at Xeinadin said “Against the recent background of the UK’s turbulent economy, there are some positive indicators on the horizon. However, statistics show that SMEs in particular have struggled to cope with the numerous shocks of inflation, supply-chain difficulties, energy costs, and staff recruitment and retention issues, and for many, it is feared that the economic improvements may be too late. The increased cost of borrowing in particular is likely to be having a disproportionately negative impact for some.”
If your business is feeling under pressure, it’s never too early to get a fresh perspective from an expert in recovering companies like yours. With our knowledge and understanding, you’ll be able to see a clear path through no matter how tough the situation. We’ll work with you to find the right solution for you and your business.
