Business insolvencies are expected to rise in 2018
The most recent Insolvency statistics have been distributed by the Insolvency Service for the last quarter of 2017.
They demonstrate that there was an increase in Company Insolvencies because of a bulk insolvency event, but the underlying number of company insolvencies decreased.
The number of company insolvencies increased in 2017, caused by a rise in creditors’ voluntary liquidations.
However, all other types of company insolvency decreased compared with 2016.
Total insolvencies rose for the second consecutive year, returning to the levels seen in 2013 and 2014. These figures are expected to get worse for businesses in Quarter1 2018, as consumers are tightening their purse strings after Christmas. ICAEW reminds businesses facing insolvency to seek help earlier and help encourage recovery.
Clive Lewis, ICAEW Head of Enterprise, comments:
“Underlying 2017 business insolvency figures showed an 11% reduction on 2016 but these figures are expected to increase in 2018. In December and after Christmas consumers have reduced their discretionary spending in favour of the basics such as food. This will continue to have a negative impact for businesses leading to an increase in the business insolvency figures as well as personal bankruptcies, particularly individual voluntary arrangements (IVAs).”
Federation of Small Businesses (FSB) National Chairman Mike Cherry, said:
“Today’s insolvency figures are a real concern and our research shows a record number of small business owners looking for an exit. One in seven entrepreneurs expects to sell, hand-on or close their business in the first quarter of 2018.
Inflationary pressure, disappointing domestic growth and flagging consumer demand are all weighing on the small business community. The proportion of small firms reporting a rise in operating costs is now at a five-year high. It’s an increasingly unforgiving environment to trade in and we’ve seen business confidence dropping steadily over the past year.
What these figures don’t reflect is the impact that the demise of Carillion is having on supply chains across the UK. We are working closely with the taskforce set-up to mitigate that impact and hope to see as many contracts reassigned as possible over the coming months. Sadly there will be jobs lost and firms forced to close as a result of the misjudged procurement choices and appalling late payment practices that preceded Carillion’s collapse.
If the Government wants to see insolvency numbers fall in 2018, opening up more public contracts to small firms and making a reformed Prompt Payment Code mandatory for large corporations would be a good place to start.”
Graham Bushby, Head of Restructuring at RSM said:
“What’s hidden in the numbers is the impact of one-off events such as the collapse of Monarch or Carillion. These can send shock waves across entire industries and their supply chain, resulting in cashflow emergencies. Such events can ultimately lead to failure if urgent action isn’t taken to stabilise the position. In 2018, business owners will need to be ever more vigilant and keep a close eye on all vital signs.”
Isobel Brett of Bretts Business Recovery has commented on the statistics:
“It is disappointing to see an increase forecast for Q1 2018, however the key message from these figures is to seek help early and attempt recovery before it’s too late. I whole heartedly agree with Mr Cherry’s suggestion for a reformed Prompt Payment Code for large corporations. Such corporations can destroy a subcontractor with late payments”
If you would like to talk to us about your business’ financial concerns please contact us.