The Insolvency has published the latest business insolvency figures for England and Wales which indicate that total the underlying number of insolvencies decreased in Q2 2018 but was higher than the same quarter in 2017. The Insolvency Service says this was driven by falls in compulsory liquidations, administrations and underlying creditors’ voluntary liquidations. Corporate insolvencies fell by 12% in Q2 compared to Q1 2018 and rose by 12% compared to Q2 2017.
Stuart Frith, president of insolvency and restructuring trade body R3, “While the dip in corporate insolvency numbers in the last quarter may surprise some, it is just one quarter. Insolvency numbers have bounced around from quarter to quarter in recent years, and the underlying trend remains slightly upwards. Insolvencies in the last quarter were much higher than they were this time last year. The fall from Q1 could be explained by the fact that corporate insolvencies often receive a bump in January to March as company directors take stock of their situation ahead of the end of the financial year.”
“While there has been a lot of attention on ‘big name’ insolvencies since the start of the year, particularly on the High Street, it’s important to remember that one business’s struggles can have a serious knock-on effect on its suppliers and customers. Recent R3 research found that over a quarter (26%) of UK companies have suffered a hit to their finances following the insolvency of a customer, supplier or debtor in the last six months.
“R3’s members are reporting, for example, that they are receiving enquiries for advice and support from companies in industry sectors linked to retailers, such as recruitment agencies and shop fitters. Company Voluntary Arrangements (CVAs) have been getting plenty of headlines recently, and while numbers are slightly elevated compared to normal, they are down from last quarter and they still account for just 2% of all insolvencies. When looking at CVAs – and particularly when thinking about the knock-on effect of insolvencies on other businesses – it’s important to remember that CVAs often provide a better outcome for creditors, employees and other stakeholders than the alternatives of administration or liquidation, as shown by recent R3 research.”
“All businesses are facing a range of pressures. Sluggish economic growth isn’t helping, while staff costs for many are greater than a year ago, following April’s increases in the National Living and Minimum Wages, with pensions auto-enrolment expenses also part of the picture. Business rates rises continue to be cited as a reason for business struggles, too.”
Responding to the announcement that 2,197 retailers became insolvent in the 12 months ending Q2 2018, Federation of Small Businesses (FSB) National Chairman Mike Cherry, said “Small retailers are up against a perfect storm of rising employment costs, spiralling business rates and high inflation. Some will have benefited from greater consumer spending throughout the World Cup and a scorching summer. For too many though, this hasn’t proved enough to survive on our high streets, where mounting operating costs are the norm.”
“There are other factors at play here too – cuts to cash machine funding and the loss of thousands of bank branches in the last few years are hurting high street footfall all over the country. It’s a real concern to see almost 1,000 self-employed individuals suffering bankruptcies in the first three months of this year alone.”
“The self-employed community, now 4.8 million-strong, is still denied basic support in too many areas. It’s time for the Government to deliver statutory paternity and adoption allowances for these strivers.”
“The Government’s 12-month delay to abolition of the anachronistic Class II National Insurance system is coming to an end. An announcement at the Autumn Budget to remove this charge on the entire self-employed population, regardless of their income levels, would be a shot in the arm for millions of entrepreneurs.”