Dip in insolvency figures ‘may just be a blip’, warn experts
PUBLISHED: 10:23 01 August 2018 | UPDATED: 15:15 01 August 2018
Roger Barcham, BMS Imaging
New government figures highlighting a quarterly fall in corporate insolvencies may only be a blip in an underlying upward trend.
That is according to the Eastern branch of insolvency and restructuring trade body R3, which is urging business owners not to be lulled into a false sense of security.
England and Wales statistics published by the Insolvency Service show that corporate insolvencies fell by 12% in the second quarter of this year compared to the first quarter.
The figure is still 12% higher than the same quarter last year.
R3 eastern chairman Mark Upton said: “Insolvency numbers have bounced around from quarter to quarter in recent years, and the underlying trend remains slightly upwards.
“The current dip 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.”
Mr Upton, a partner at Ensors Chartered Accountants in East Anglia, also pointed out that a business’s struggles can have a serious knock-on effect on its suppliers and customers. The ‘domino effect’ of the recent spate of high profile insolvencies involving large companies such as Carillion and Toys R Us is yet to be felt fully in the region.
He added: “R3 Eastern research shows that one fifth (20%) of companies in the East of England has suffered a financial hit following the insolvency of a customer, supplier or debtor in the last six months, and the financial impact of the insolvency of another business was described as ‘very negative’ by 7% of the region’s companies, and as ‘somewhat negative’ by 13% of local respondents.
“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.
“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.”
He advised any business encountering problems to seek advice from a qualified adviser as soon as possible.