Over a thousand SMEs are scheduled to cease trading in January

Over 760 businesses ceased trading in December 2016 with 1093 small businesses scheduled to cease trading in January according to research, carried out on behalf of London insolvency practitioners Hudson Weir.

The research reveals that 14.5 per cent of these companies were operating in the retail and food and drink sectors. This means at least another 110 empty units in high streets across Britain this month. 3633 businesses which failed in the third quarter of 2016.

The reasons for company insolvency can be complex, ranging from unrealistic planning through to fraud and unforeseen loss of market share. But the root cause of insolvency is frequently quite simple: inadequate cash flow. Financial trouble tends to strike early in the business life cycle, with only 41.4 per cent of the UK businesses started in 2010 surviving to their fifth birthday. But is Brexit to blame for the latest crop of insolvencies? Even though UK economy seems to be surviving the immediate post-referendum period, vulnerable business sectors—like construction—have experienced contraction.Data collected during the second quarter of 2016 has shown that the construction industry is where the effect of poor cash flow is most keenly felt with 2450 companies associated with construction ceasing to trade. After construction, wholesale, retail and the vehicle repair trading sectors were the next to feel the squeeze with 2065 company insolvencies.

Restaurants, cafes and other food outlets are heavily represented in the latest insolvency reports too, a trend which could reflect the recent well-publicised rise in food prices. Even large companies such as catering giant Compass have been affected by the consequences of a weaker pound.

Hasib Howlader at Hudson Weir said ‘Brexit is unlikely to bring good news for small businesses and it seems now it’s just a question of how bad it’s going to be. With more than 40 per cent of small businesses struggling to survive beyond five years even in a pre-Brexit climate, it’s now more important than ever for small businesses to be looking for warning signs that their business may be unhealthy. If cash flow is a problem, and you can no longer pay your bills as they fall due, the earlier you speak to an insolvency practitioner the better.’

Even though businesses are always at the mercy of circumstance, it’s possible to mitigate the effect of uncertain situations like Brexit.