Company administrations rise by 24% in climate of uncertainty

Paul Barber

A sharp rise in the number of company administrations reflects political uncertainty and anaemic growth, according to the North West branch of insolvency and restructuring body R3.

The latest figures from the Insolvency Service show that administrations rose by 24% in 2019 compared with the previous year, and are now at the highest level since 2013.

The total number of business insolvencies in England and Wales rose in real terms by 6.8% in 2019 to reach 17,196.

Paul Barber, North West chair of R3 and a partner at Begbies Traynor, said: “It’s not an easy climate for doing business out there.

“Political uncertainty, particularly around Brexit, has held back business decisions and investment, but weaker consumer confidence and sector-specific issues can’t be discounted either.

“Business confidence fell last year and hiring confidence hit a seven-year low.

“Alongside this, economic growth stalled, consumer debt increased, and consumer confidence remained low.

“Many companies also had higher wage bills to contend with, due to rises in minimum and living wage levels, and increased employer pensions contributions.”

He added: “Some sectors have been hit harder than others, although difficulties are increasing across the board.

“The construction sector struggled, traditional retailers were hit by declining footfall and the growth of online shopping, and manufacturing had a worse year than 2018. Brexit-inspired stockpiling may have added to disruption.”

However, Mr Barber said 2020 would be a key year for businesses: “A Government with a decisive majority ends some domestic uncertainty, although there are still big question marks around what Brexit will look like – and when new rules will kick in.

“Wider economic performance will partly determine whether corporate insolvencies continue to rise. On the plus side, there are signs that businesses are looking to increase investment, so there is cause for optimism.”

He warned that the Government’s plan to make HMRC a ‘preferential creditor’ in insolvencies from April could also push up insolvency numbers as it would benefit HMRC at the expense of lenders, customers, and suppliers, and hurt business lending.

He said: “These insolvency figures should be a wake-up call to any director of a company which is finding it hard going at the moment.”