Business insolvencies continue upward trend – R3

Paul Barber

The number of company insolvencies continued its upward trend in the second quarter of the year, according to the latest official figures released today.

While the number of insolvencies was down by 12% compared with the first quarter – when the figures reached a four-year high – it was 12% higher than the same period last year.

Construction firms were the worst affected, followed by the retail, wholesale and vehicle repair sectors.

The figures show there were more than 3,900 business insolvencies in the second quarter.

Paul Barber, North West regional chair of the insolvency and restructuring trade body R3 and a partner at Begbies Traynor, said the fall from the first quarter could be explained by the fact that insolvencies are often higher at the end of the financial year.

“Insolvency numbers have bounced around from quarter to quarter in recent years, but the underlying trend remains slightly upwards.

“Insolvencies in the second quarter were much higher than they were this time last year.

“While there has been a lot of attention on ‘big name’ insolvencies since the start of the year, particularly on the high street, it’s important to remember that one business’s struggles can have a serious knock-on effect on its suppliers and customers.

“Recent R3 research found that over a quarter (19%) of North West companies have suffered a hit to their finances following the insolvency of a customer, supplier or debtor in the last six months.

“R3’s members are reporting receiving enquiries for advice from companies in industry sectors linked to retailers, such as recruitment agencies and shopfitters.”

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

Today’s figures also show that personal insolvencies are at their highest level since 2012, which can have a knock-on effect on businesses.

There were 28,951 personal insolvencies during the three months to June – up by 4% on the previous quarter and 27% on the same quarter last year.

The number of IVAs (Individual Voluntary Arrangements) is now at a record high.

Mr Barber said “Personal insolvency numbers have been on the rise since the second half of 2015. This latest rise underlines the fact that, for many people out there, financial stability is out of reach.

“There are plenty of reasons why people might be feeling the pinch. Wage growth is barely higher than inflation, after a long period of real wage falls.

“Although unemployment is low, there are more people earning variable amounts in the gig economy, which can make budgeting difficult.

“Meanwhile, the average amount of debt per head has been growing and household savings falling. In 2017 the average household spent £900 more than it earned – people’s safety nets are getting thinner.”

He warned: “Although not yet near the highs seen a decade ago, the rise in personal insolvency numbers should make the Government sit up and take notice.

“A long-mooted ‘breathing space’ is currently in the works, which would provide people in serious debt with a period where they are protected from creditor action and can seek advice.

“This breathing space can’t come soon enough and there is widespread support for its introduction, so it’s unfortunate that the Government has decided to delay it.

“Anyone worried about their financial situation should seek guidance on ways forward from a reputable professional. There is help out there, and tackling problems rather than letting them spiral can be hard, but ultimately well worth it.”

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