Company insolvencies hit five-year high
2 Aug 2019
The total number of insolvencies in England and Wales has risen 12% on the same period last year and are at their highest level for five years, according to the Insolvency Service
2 Aug 2019
The number of company insolvencies in Q2 2019 was 4,321, up 2.6% on Q1 2019 and 11.9% higher than Q2 2018, according to Insolvency Service figures. It was also the highest level of insolvencies in any quarter since Q1 2014.
The increase was driven by creditors voluntary liquidations (CVLs) which rose 6.9% compared to the previous quarter and 14.3% compared to the same quarter last year.
The vast majority of insolvencies are CVLs. In the latest figures, CVLs accounted for 70.4% of all company insolvencies and 18.2% were compulsory liquidations while all other types accounted for 11.4% of insolvency.
Administrations accounted for 400 insolvencies, down 11.4% from the previous quarter but still the second highest number of administrations since Q1 2014 and 15.2% higher than the same quarter last year.
The liquidation rate is near a ten-year low but showing signs of increasing over the past year. Using a rolling average over 12 months, for every 10,000 active companies, 42.3 were liquidated, a slight increase from 42.1 per 10,000 for the previous quarter.
Sectors driving the increase in insolvencies were the accommodation and food service industry with 74 extra cases in the 12 months ending Q2 2019 compared to the 12 months ending Q1 (+3.4%), the construction industry with 37 additional insolvencies (+1.2%) and other service activities with 32 additional insolvencies (+4.7%). Running counter to this were administrative and support services with 53 fewer cases (-2.8%) and transportation and support services with 21 fewer cases (-3.9%).
In Scotland, there were 247 insolvencies in Q2 2019, down 7.1% on the same quarter of the previous year. Most liquidations in Scotland are compulsory in contrast to England and Wales where most cases are voluntary.
In Northern Ireland, the number of liquidations was 29.6% lower in Q2 2019 (88 cases) compared to the same period in 2018 (125 cases).
Duncan Swift, president of insolvency and restructuring trade body R3, said the increase in corporate insolvencies confirms that business is getting more difficult in the UK.
‘Businesses in a variety of industries are struggling right now. Retailers are suffering as the world in which they operate changes and more and more people shop online. Manufacturing output and confidence is low. Private and business car sales are down. And businesses which stockpiled items ahead of the original Brexit deadline of 29 March will now be seeing those decisions have an impact on their cash flow levels,’ he said.
He added, ‘Although numbers of administrations, a procedure designed to support business restructure and rescue, have fallen back slightly from last quarter, they are at still their second highest quarterly level since 2014. Meanwhile, the increase in Creditors’ Voluntary Liquidations suggests business rescue is more difficult to achieve in the current economic environment, perhaps reflecting greater uncertainty that purchasers can deliver sustainable business turnarounds.’
Tom Reeve | 02-08-2019