Corporate insolvencies on the rise
Company insolvencies have increased for the first time since Q1 of 2014, according to new government figures.
The Insolvency Service has revealed that an estimated total of 3,694 companies entered insolvency in Q1 2016, which was 5.4% more than Q4 2015 but 3.6% lower than Q1 2015.
Meanwhile, a total of 804 companies were subject to a compulsory winding-up order
in Q1 2016, a 36.0% increase on the previous quarter but 11.5% lower than Q1 2015. This was the main driver of the increase in total company insolvencies.
There were an estimated 301 administrations in Q1 2016, a decrease of 11.1% compared to the previous quarter and 10.9% lower than the same quarter in 2015. There were an estimated 75 CVAs in Q1 2016, a decrease of 7.4% on the previous quarter and 12.8% lower than Q1 2015. There were no administrative receiverships.
R3 Midlands chairman Chris Radford, a partner at Gateley in Nottingham, said: “Corporate insolvency numbers last rose at the start of 2014 and, despite the rise this quarter, numbers are still well below where they were this time last year. However, UK businesses are starting to have a tougher time than they have had over the past few years.
“It should be noted, though, that the rise is driven by compulsory liquidations which indicates that creditors, probably including HMRC, are beginning to lose patience with customers who are not paying their debts.
“At the same time, it is interesting to see that the estimated liquidation rate is at its lowest level since comparable records began in 1984, which is a sign of the continuing strength of the economy.
“There has been a drop in the number of administrations which may be down to the increasing move by the insolvency profession and lenders to embrace restructuring outside of formal insolvency processes.
“Company voluntary arrangements are at their lowest since 1998. These are primarily used by the retail sector and, until headlines this week, there hadn’t been a large number of retail failures at the very start of the year.
“Following the recent administrations of BHS and Austin Reed, it will be interesting to see if the next quarter’s insolvency figures show if these are just the tip of the iceberg of a wider problem on the High Street, and if any job losses have an impact on the personal insolvency statistics.”
