Posted by Luke Venner on February 9, 2018
The latest statistics for insolvencies in England and Wales covering the last quarter for 2017 reflect a difficult year for companies and individuals.
The Association of Business Recovery Professionals, R3, have highlighted a number of trends in the latest insolvency figures from the government.
Corporate insolvencies rose by 2.5% to 15,112 in 2017 over the previous year, excluding one-off bulk insolvency events, and that was despite a 17.2% fall in such insolvencies in the last quarter of 2017 compared to the previous quarter.
The overall year-on-year rise in insolvencies reflects a difficult year for companies, with cost inflation eating into margins, together with growing customer resistance to higher prices. Business rate changes, an increase in the National Living Wage, the new Apprenticeship Levy and the final stage of pension auto-enrolment have all hindered momentum.
R3 members report that the construction and retail sectors are feeling the most strain, most recently demonstrated by the collapse of Carillion and profit warnings from Capita.
The figures for the first quarter of 2018 are likely to reflect the intense competition and discounting that took place in the period before Christmas, as well as the fallout from Carillion’s liquidation.
Personal insolvencies rose by 9% to 99,196 in 2017 over the previous year, and that was despite an 11% fall in such insolvencies in the last quarter of 2017 compared to the previous quarter. When you compare the last quarter of 2017 with the last quarter of 2016, there is a 10% increase in insolvencies.
Personal insolvency numbers have in fact been rising since mid-2015, returning figures to the level last seen in 2013 and 2014.
The overall year-on-year rise in personal insolvencies reflects poor wage growth, despite record levels of (albeit insecure) employment, and inflation eating away at disposable incomes.
There is also evidence that lenders are tightening their credit conditions, making finance less accessible and more expensive. However, there is still room in the market for consumers to roll over their debts to keep costs down, though the Bank of England’s recent announcement that it is considering an interest rate rise sooner rather than later could make life difficult for those with larger borrowings.
When insolvency numbers are in the main kept low because of low interest rates and an easy access to alternative forms of finance, businesses manage to stay afloat. But that could change with further interest rate rises.
Businesses that are currently in difficulties are increasingly seeking advice early enough to restructure and turn themselves around outside of a statutory insolvency procedure. We therefore strongly encourage individuals and business owners with financial problems to take early, professional advice to maximise their available options.
If you would like to discuss how we can help, please contact a member of our Business Recovery & Insolvency team.