Fall in corporate insolvencies ‘may only be a blip’

Chris Radford

Latest government figures highlighting a quarterly fall in corporate insolvencies may only be a blip in an underlying upward trend, according to the Midlands branch of insolvency and restructuring trade body R3.

The body is urging business owners not to be lulled into a false sense of security as England and Wales statistics published by the Insolvency Service show that corporate insolvencies fell by 12% in the second quarter of this year (April–June) compared to the first quarter (January–March).

R3 Midlands points out that corporate insolvency figures are still 12% higher than the same quarter last year, and that company directors still need to remain vigilant to help safeguard their businesses.

R3 Midlands chair Chris Radford said: “While the dip in corporate insolvency numbers in the last quarter may surprise some, it is just one quarter. 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.”

Radford, a partner at the Nottingham office of law firm Gateley, 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 Midlands research shows that one quarter (22%) of East Midlands companies 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 5% of the region’s companies, and as ‘somewhat negative’ by 17% 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.

“The sooner any businesses facing problems seek advice from a qualified and professional adviser, the more options they will have to turn themselves around.”

Close