October saw the publication by the Insolvency Service of the Insolvency Statistics for the Third Quarter of 2016. Overall, company insolvencies were up slightly – 2.2% – on the previous quarter, and up 1.1% of the same quarter last year.
While this bucks what has been a downward trend over the last five years or so, a single quarter rise is not necessarily an indicator of post-Brexit financial problems for UK companies, and we needn’t brace ourselves for impending doom – at least, not yet. Compulsory liquidations continue to decrease, such that the Insolvency Service reports that the liquidation rate is now at its lowest level since comparable records began in 1984. While creditors’ voluntary liquidations were up, when viewed in the context of trends observed over the past two years, the overall picture remains fairly stable.
Some of the overall increase may be accounted for by a rise in the use of rescue and restructuring procedures like administration, which do not necessarily result in the affected company ceasing to exist altogether. Even this, however, is reported by the Insolvency Service as being in line with medium-term trends.
R3, the Association of Business Recovery Professionals, suggests that its own research indicates that ‘only 21% of businesses it surveyed reported the presence of a key indicator of [financial] distress, while 62% report at least one sign of growth’.
As long as the economy continues to show growth overall, insolvency numbers (both personal and corporate) are unlikely to rise steeply, though anecdotal evidence suggests that the effect of Brexit is yet to make itself fully felt, with R3’s research indicating that 74% of the businesses it surveyed have yet to feel any effect either way.
If you are a director of a company in financial distress, our dedicated commercial team is experienced in working with companies of all sizes and at all stages, whether facing compulsory liquidation or considering administration, and will happy to assist in any way we can.