Roadmap for Business Survival - Roundtable with Insider Media

Insider gathered some of Yorkshire’s leading professional advisers to share insights on business resilience and strategic planning for the future, to help companies navigate a challenging period defined by rising costs, political reform and global volatility.

How would you describe insolvency and restructuring levels in the region?

Johnny Abraham, managing director, J9 Advisory

We’re currently not as busy as people expect us to be. I flick between Leeds, Manchester and London, and there’s more work coming out of London than there is in the regions. However, the regions tend to follow London, so I expect that the regions may start getting busy from summer time onwards.

Louise Longley, partner and insolvency director, Begbies Traynor

Across Yorkshire, there have been some increases. Statistics from Red Flag Alert for Quarter 1 (Q1) 2025 show there are 6,600 construction firms in distress, which is 5.3 per cent higher year-on-year, but still lower than Q4-Q1 of 2024-2025. Real estate has gone up in the first quarter but it’s still lower than last year. We’re not seeing the levels that we thought we would, but I think there’s a lag as policy changes don’t take immediate effect. I think we’ll start to see more activity in 6-12 months.

Gemma Wright, managing director - sales and distribution, Reward Funding

We don’t tend to see a huge volume of insolvency cases as a short-term lender. Instead we’re seeing emerging issues earlier down the curve, including cash flow pressures and there is definitely a trend of tightening from HMRC. They’re more active and grabbing hold of things rather than sitting back and waiting for someone else to take control.

Jon Chesman, director in the restructuring and insolvency practice group, Squire Patton Boggs

You’ve got to dig behind the stats because they fluctuate so much, month-to-month. The main trend is that [the figures] are now higher than they were pre-Covid. The second point is digging behind what the cases actually are. What we’re seeing in the numbers tends to be at the smaller end of the spectrum [owner-managed businesses] due to cases like HMRC being more active than they were during Covid. You can have an increase in overall numbers, but that might not necessarily lead to cases that we might all be seeing and dealing with around the table.

Zoe Oates, partner, restructuring, Schofield Sweeney

In our debt recovery team we’ve seen that clients are more willing to go down the winding up route, though not in massive numbers. Through Covid there were restrictions in place, but for a long time people didn’t have the appetite to press the button. To compare London and the regions, we’re waiting for that work to kick in, which we’ve been waiting for since Covid because we’ve kept saying, ‘it’s going to come’. The reality is, we said there was going to be an avalanche at the end of Covid and it hasn’t happened. I’m still of the view that quite a lot of companies that would have gone into liquidation haven’t because of Covid support. I think that has impacted the rate of formal insolvencies. As advisers, we’ve all been in that situation of being asked, ‘can I push it on to a later time because we might be in a better position?’ It’s that balance of knowing when to say to a director, ‘you can’t push it on anymore’ as there’s a drop off and cash is going to run out next week.

What sector trends are you seeing?

Abraham

Hospitality and retail are struggling, but more so, we’re going to see big problems in the care sector as they rely on workers at a certain wage level, as well as foreign workers coming in, which there have been restrictions on. Plus, where homes work with local authorities and the NHS, the bed rates in care homes are fixed, meaning that while your costs go up you can’t just increase your prices; rather the local authority/NHS customer will tell you what they will pay.

Longley

In particular, retail, construction and hospitality [are seeing the most insolvency cases] because they’ve got a high employment rate and minimum wage impact which is adding to the rising costs. The private education sector is struggling as it is not seeing the number of boarders from abroad [that we saw] pre-Covid. We’re seeing a range of sectors rather than something in particular. Hospitality cases are also driven by changing consumer spending patterns.

Wright

We’re continuing to see really good businesses in perceived poor sectors. Some of the mainstream lenders are really nervous at the moment about certain sectors, like hospitality and leisure, whereas the established players who know what they’re doing in that market are seeing opportunities. Sometimes you’ve got to be careful because it's not a whole sector [that’s in distress]. The sector might be facing challenges but you can still have some emerging, strong businesses coming out of it.

What common mistakes do businesses often make?

Abraham

Just because money is potentially available doesn’t mean a director should take it. We see brokers in particular who use certain platforms to get money into businesses. But if you’ve got a bucket with a hole in it, pouring more water into it doesn’t fix the issue. Directors need to be careful as they can often end up in a business that is in a worse position than they were before they took the money, and often they’re personally liable for additional funding. There have been a lot of new lender names entering the market, but you've got to be very careful who you borrow money from. Are they actually supporting the interests of your business or is it just a money-making process for them?

Longley

It’s surprising how many companies don’t have a cashflow forecast. A lot of decisions are made without a forecast and usually by considering what they’ve done historically. Sometimes they haven’t changed the mindset - especially the older owner-management who have not encountered financial distress and had to adapt. It’s very difficult because you don’t anticipate being in distress or having financial worries sometimes. It can happen really quickly. The advice we give is very unique to what the company’s circumstances are. Change and adapting to the circumstances is a big thing.

Additionally, companies often think there’s going to be a big cost to seek advice, which isn't always true. If you get the advice early, it can often actually cost less than it would later on. This allows them to quickly change something or explore all options early which can often be done by giving initial free advice.

Wright

We all talk about spotting the early warning indicators, but a lot of owner-managed businesses are innovators; they’re not business people. So there’s an education piece in terms of knowing what the early warning indicators are. There is sometimes a naivety that if the machines are still running and stock is still going out of the door, there isn’t a problem.

Chesman

Contingency planning is the problem. Every business is different, so they're going to have different issues. We see many cases where plan A is brilliant, but if it doesn’t work there’s no plan B. For example, where a business has been pursuing a sales process and it looks a really good way to solve their current problems, then for whatever reason the sale falls over, they then have a problem without a plan B ready to execute. We would tend to say, ‘if you'd have thought of a plan B, C or even D earlier, you might have been able to execute that in time to avoid more significant issues’.

Oates

The cash flow and credit management piece often gets lost. Even when businesses are in good times, they forget about the easy stuff. For example, what credit terms are you extending? Maybe you wanted to get that job and you haven’t stuck to your payment terms. You've acted in good faith and it’s too late, it’s gone. You’re £50,000 down, which to a small company, might mean you can’t pay wages.

An extra point focuses on the advisers as well. For instance, on a very basic level, a business owner may always have had the same accountant. Very often we’ll hear, ‘my accountant has told me to do X, Y and Z,’ which might have been the correct advice when the company was solvent, but not when the company is in distress. If professional advisers don’t have expertise in restructuring and insolvency, it is important to have connections to those who provide that advice.

Ian Flaxman, head of growth finance, Allica Bank

I don't think forecasting is done brilliantly well, which I understand because SMEs are not usually finance people. But it’s really important to understand, particularly with all the events that are happening in the wider macro environment. ‘If X changes, what does that mean, and not necessarily to my profit and loss, but to my cash, and how much buffer have I got?’

How popular has alternative finance among SMEs become over the last few years?

Wright

The growth we’ve personally seen post-Covid has been significant. Coming out of Covid, we saw some of the mainstream lenders retrench even further and, while we have seen them coming back into the market in the last few months with a lot of noise and some aggressive rates and LTVs [loan-to-value], we’re not seeing it translate into cash going out of the door yet.

Last year, the alternative lending market was 60 per cent of all SME lending. The biggest challenge in this space is the changing landscape with an ever-increasing number of new lenders. For your typical owner-manager, how do you navigate that and find the right lender and partner? Too many businesses still go to the mainstream banks, get a ‘no’ and don’t ask again.

Oates

For a company that’s in financial distress at a certain period but has a good business plan going forward, it’s definitely the alternative lenders that have become really important in our market because of how quickly they can move, and they have sector specialists as well.

Flaxman

If you’ve got something that’s really vanilla, then yes [that works for a clearing bank] but anybody who’s got issues needs to be talking to somebody else. You might not think of a banker or a lender as a professional adviser, but if we do our job properly, we’re part of that process. It’s thinking about: how do we structure it, what is the solution, and listening to the customer about what’s going on and thinking of a solution rather than, ‘I’ve got three boxes on the shelf, there’s your box’. Traditionally, funders have tried to industrialise business lending to make it efficient and cheap, but it doesn’t work.

What are businesses turning to alternative finance for?

Wright

We’ve got three types of customers that operate in the alternative space. Firstly, businesses that have got themselves in a situation and need some support. Then we’re increasingly seeing a lot of opportunists because, while there is some distress in the market, others are taking advantage of it if they can get hold of cash quickly. The third type of customer is investors – people who are perhaps in a stronger position and are thinking strategically and focusing on growth. So while working capital does feature, as people who want a traditional overdraft are seeing the alternative market replacing the mainstreams, we’re also seeing a lot of investment and transactions, be it acquisitions or property purchases.

What steps should businesses take to manage cash flow and mitigate risk?

Abraham

We’ve talked a lot with clients recently about resetting the relationship with the customers and their terms of payment. If payment terms have been agreed at 30 days, then that should be adhered to, rather than the customer being left to pay whenever they want, and adding ‘by the way, can we put another order in?’ It’s got to be a business relationship. That gets lost often, especially with owner-managed businesses where there are more personal relationships involved, making it harder for them to turn around and say, ‘we need to get paid now’.

I also push prudent rather than optimistic planning. It’s great having a forecast but if it’s ‘pie in the sky’ and everything is based on the best-case scenario occurring, then it's not going to be realistic or helpful.

Longley

It’s about trying to make businesses and their advisers aware of the early warning signs from both an internal and external point of view. Often the company’s advisers are the first to become aware of any financial distress and should be aware of those in the market who can help companies quickly and efficiently, and provide options that often would lead to recovery rather than insolvency. Externally, it’s being aware of the market and any changes to the market or suppliers and customers that would impact the company. There are plenty of sources of information, such as Companies House and Caseboard, for companies to check. We need to be advising directors early.

Chesman

We’re trying to help businesses spot signs of stress and distress, not only in their own business but also in their supply chains. Have you got any ways of identifying if one of your suppliers might be starting to underperform? If you have, what’s your contingency plan? If you’ve got a sole supplier, you could move to dual source. If you’ve got an over-reliance on one jurisdiction, given the events that are happening globally, do you try to spread that around? It’s a lot easier said than done, and probably something for larger businesses that have a much more global presence, but that’s the advice we’ve been asked a lot more about since Covid.

Oates

Some owner-managers don’t understand the difference between a limited company and themselves, and their own directors’ duties. They just see it as, ‘this is my life and this is what I’m working towards, particularly in a family business’. Often as lawyers, we have to have that difficult conversation and say, ‘you need to think about your own personal position’. In the heat of the moment take a step back and say, ‘is this right for me personally?’ Consider, what is the age of the person or is it a family business? It’s very complex. There is no one-size-fits-all.

What is your outlook for businesses in the rest of the year and beyond?

Chesman

If you look back over the last couple of years - Brexit making imports and exports more challenging, then Covid, then rampant inflation and rising utility bills, we’re at the point where each other layer of stress or cost may have a disproportionately high impact, just because of all of the other challenges and costs that businesses have had to absorb.

Flaxman

It’s going to be choppy for the rest of the year. I know the situations happening on a global scale don’t necessarily impact domestic businesses immediately, but there’s just so much stuff going on in the world that is changing very quickly.

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