Company Insolvencies Grow at Fastest Rate Since 2009

The amount of companies becoming insolvent grew at the highest rate since 2009 during the third quarter of 2018.

Official figures from the Insolvency service show a 19 percent rise in company insolvencies during the third quarter of this year compared to the same three months in 2017.

There was also a rise in the actual number of corporate insolvencies, there was a 9 percent increase in insolvencies compared to the second quarter.

The Insolvency Service has stated that the rise in insolvencies is due to the increase of Creditors Voluntary Liquidations which have reached the highest levels since 2012.

There were 4308 new companies registered as insolvent between July and the end of September across England and wales, this level hasn’t been seen since early 2014.

The most heavily impacted sector was construction, this accounted for 2924 companies having run out of money and being recorded insolvent in the 12 months leading to the end of quarter 3 2018.

The second most impacted is the “wholesale and retail trade; repair of motor vehicles”, this sector saw 2270 new company insolvencies in the year before the end of the third quarter.

The R3, the leading organisation for insolvency, restructuring and turnaround specialists in the UK, has pointed out that the high-profile cases we see in the newspapers are also having an effect on smaller companies downstream.

“For every struggling retailer unable to pay its debts, there will be numerous suppliers as well as shop-fitting or delivery firms who come under pressure, while there have been well-publicised troubles in sectors like construction, too,” commented R3’s vice president Duncan Swift.

“The key causes of insolvencies seen by the insolvency profession are familiar. Rates problems, particularly for retailers, are frequently mentioned, and the chancellor’s rates-relief announcements in the Budget have come too late for some,” he added.

Rick Smith, the Managing Director of company rescue and recovery specialists Forbes Burton, added, “The main issue that business rates overall are still too high. There really needs to be some sort of wholesale reform to turn the high street around.

The new digital services tax announced by the chancellor in the latest budget will probably not help the high street directly either as it only applies to businesses that have £500million turnover, although it does go some way into levelling the playing field.

It’s a small step in the right direction but these measures will need to go further to have any major effect.”