Why they’re using winding up petitions more to enforce payment from debtors

The first real cold snap of the winter has begun to envelop the UK, and many consumers and businesses have lost their internal debates about whether or not it’s time to put the heating on.

At the same time, several energy companies have decided to increase the temperature for businesses that are behind with their payments. 

British Gas alone have brought 37 winding up petitions against businesses with arrears this year of which 13 have directly led to the business being wound up – that’s 35%.

The next largest energy provider – E.ON issued 21 winding up petitions over the same period, seven of which (33%) led to the company being liquidated.  

Between them, they supply the majority of large businesses in the UK with British Gas being the largest supplier to SMEs.

One of the businesses liquidated provided management services to bars and suffered a slump in revenue after the venues were handed back to landlords due to the restrictions in capacity caused by the pandemic and restrictions. Others included a pub company and a social club which were also adversely affected.

British Gas said: “Our debt policy is fair with robust controls in place. We seek to engage early with business customers to discuss the support and options available and are able to offer extended payment plans where appropriate. 

“We do not treat winding up petitions lightly and only consider them in specific circumstances where there is clear liability, the company has a sizable balance and appears to be soluble with a healthy asset position. 

“Winding up petitions account for less than 1% of our aged debt. We recognise that the current economic climate is difficult for smaller businesses which is why we have committed to a £15 million small business debt relief package for those struggling this winter.”

E.ON said: “A winding up petition is always a last resort following an extended period of engagement with a business customer and only applicable in specific situations where the business has proven affordability.

“It is a rare event and the number of petitions represents a small fraction of our hundreds of thousands of business customers around the country.  Our advice for any customer struggling to meet payments is to contact us so we can provide them with the appropriate support we have available.  

“When a payment becomes overdue, we will engage the customer to help them arrange payment plans and connect them with third party support, such as the Money Advice Trust, when customers face hardship or struggle to meet payments.”

Get ready for more winding up petitions in 2023

Chris Horner, Insolvency Director with BusinessRescueExpert, said: “The government introduced restrictions on the issuing of statutory demands and winding up petitions during the pandemic to help businesses who were struggling to meet repayments while lockdowns were still in place.

“Those restrictions were finally lifted this year which unfortunately has coincided with the surge in wholesale energy prices pushing many businesses into further financial difficulties and forcing the government to provide some temporary support.

“What support there is ends in three months time in March with no indication yet what will replace it in terms of additional “targeted” help for certain industries which will undoubtedly leave businesses operating in other sectors vulnerable. 

“A winding up petition can be bought for debts as little as £750 and the fact that British Gas and E.ON to name just two are being more aggressive in recovering these debts to the point of liquidation in a third of cases, shows that arrears can no longer be ignored.”

We’re already seeing more creditors making up for lost time and taking action on outstanding debts and while winding up petitions are a last resort for most, their increasing use is a sign that they are going to become more prevalent in 2023 and beyond. 

If your business is looking at tightening circumstances this Winter and you feel like making regular debt repayments will become a struggle if not impossible, then get in touch with us

Our expert advisors will be able to let you know clearly and quickly what options are available to you right now. 

You might be surprised by how much room to manoeuvre you have but this and your choices will shrink the longer you leave before taking the decision to make contact and make 2023 a far better year than you think you’ll have.