Government figures revealing a six year high in the number of corporate insolvencies must be a wake-up call for local businesses, warns the Midlands branch of insolvency and restructuring trade body R3.
England and Wales statistics published by the Insolvency Service show that there were 17,196 corporate insolvencies in 2019 – the highest figure since 2013.
The statistics, which exclude one-off ‘bulk insolvency events’, also show a 6.8% rise in corporate insolvencies in 2019 compared to 2018.
R3 Midlands Chair Eddie Williams, a partner at Grant Thornton in the East Midlands, said: “These figures are a reflection of anaemic economic growth throughout 2019, with each quarter of last year seeing more corporate insolvencies than the corresponding quarter in the previous four years.
“Political uncertainty, particularly around Brexit, has held back business decisions and investment, as have weaker consumer confidence and sector-specific issues.
“Some sectors have been hit harder than others, although difficulties are increasing across the board. The manufacturing and construction sectors continue to struggle, while traditional retailers have been hit by declining footfall and the continued growth of online shopping. Brexit-inspired stockpiling in 2019 may also have added to economic disruption.”
Williams pointed out that the numbers of administrations increased by 24% in 2019 compared to 2018, putting them at their highest since 2013.
He continued: “This will be a key year for Midlands businesses, and the insolvency profession will do its best to support them. However, it is vital to have the full backing of the Government as well.
“One key factor which may affect insolvency numbers in 2020 is the Government’s plan to make HMRC a ‘preferential creditor’ in insolvencies from April. This will benefit HMRC at the expense of lenders, customers and suppliers, and will hurt business lending. Some businesses could be pushed into insolvency due to a reduction in their lending facilities.
“While R3 will continue to lobby on behalf of its members for more positive legislative change, the Government’s insolvency figures should be a timely prompt to any company director whose business is struggling. Objective advice should be sought from a qualified, professional source to decide the best path forward – and the earlier this is done, the better.”