Significant rises in the cost of bringing commercial and civil cases to court may well push more and more businesses into liquidation, preventing them from exploring other available options, according to experts from Begbies Traynor.

By April, the fees for bringing many commercial and civil cases to could look set to increase by more than 600%.

Courts Minister Shailesh Vara says that this increase is aimed at ensuring that hard-working taxpayers are not subsidising people and businesses who use the courts to pursue “petty” matters, such as debts owed to businesses, personal injury claims, and medical negligence claims.

However, more and more businesses have to face up to the fact that they will now find it difficult to pursue debts through the courts, pushing them into insolvency where they migh previously have been able to access expert help.

John Fairbrother, who runs the Liverpool office of corporate recovery firm Begbies Traynor, said:

“By giving businesses that are owed money through no fault of their own affordable access to justice, the current system can often help them recover debts.

“Where that debt has exposed weaknesses in their business, this process can act as a timely alarm bell for firms to take specialist recovery advice and turn their fortunes around before it is too late.

“These new fees make that much less likely, making the courts too expensive to help recover debt and instead leaving businesses – many of which are fundamentally still viable ventures – with nowhere to turn and little time to seek help.”

John Fairbrother added:

“Instead, small businesses will go from being in good health to being forced into insolvency, purely as a result of unpaid invoices.”

With the UK economy on the recovery, John Fairbrother says that most businesses often avoid seeking help with the hope the improving economic conditions will simply solve all their problems without them having to leverage their position to put their businesses on better terms.

This means that firms often leave it far too late to pursue advice, which in turn means that their options are limited when it comes to solving underlying issues.

Right now, chasing debts through the courts is a sign that professional backing is necessary. In making this option more expensive, and therefore unavailable to some, more and more businesses will only find out that they are in trouble at the last minute.

John Fairbrother continued:

“Nobody likes facing up to bad news, and that’s as true in business as anywhere else.

“But at least the current system allows for businesses to not only get what is rightfully theirs, but also to address any underlying business issues that might be either causing, or caused by, bad debts.

“Increasing court fees in this way will close that door to many businesses – and leave far more being declared insolvent than should otherwise be the case.

“It is vital that business owners seek timely advice regarding the recovery options available, should they fall foul of the new court system.”

For more information about Begbies Traynor, you can visit their website here.

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Words: Peter Cribley