Brexit will increase the number of UK business failures

11th October 2016

Sixty two per cent of a cross section of the UK’s insolvency industry believes that Brexit will lead to an increase in the number of business failures over the next 12 months, according to a survey conducted by international law firm Pinsent Masons.

Over 400 insolvency practitioners attended th Restructuring and Insolvency conference, hosted by Pinsent Masons, on 4th October . Attendees took part in a survey to determine attitudes towards restructuring and insolvency, with the impact of Brexit being at the heart of discussions.

62% of the audience believe that the UK’s vote to leave the European Union will lead to a greater number of business failures over the next 12 months, with the poll revealing that business confidence in the manufacturing and retail sectors has dropped.

Almost half of all survey participants agreed that the manufacturing (22%) and retail (22%) sectors combined are most likely to be hit the hardest, over other sectors such as financial services (12%), hospitality and leisure (12%) and infrastructure (9%). According to the survey, the real estate sector remains vulnerable, as 17% of the audience believe that it will also see an increase in business failure.

Nick Pike, a partner in the restructuring team said “Although consumer spending has yet to be impacted dramatically, any continuing fall of the pound is likely to translate into more cautious consumer spending as imported goods increase in price. The UK’s manufacturers are also likely to see increased prices for imported parts.

“Very little is clear about the terms on which the UK will leave the EU and so businesses are in a period of great uncertainty. Insolvency experts are firmly in agreement that until those issues are resolved, businesses are likely to remain cautious about investment decisions.”

2016 has been a tumultuous year already in the retail sector with a reported 18 companies alone having gone into administration, affecting more than 23,000 employees. With this in mind, the survey asked participants whether they broadly welcome the government’s proposals outlined in the recent Corporate Insolvency Framework Consultation for a debtor-triggered moratorium – the result was that than two-thirds (69%) agreed that they do welcome the framework.

“These results show that insolvency practitioners are largely on the same page and would welcome measures to provide a stronger framework to rescue viable businesses, whilst creating an environment that supports employment,” added Pike.