Administrations continue to fall as benign economic conditions ease pressure on business
The benign conditions evident across the UK economy are reflected in new analysis by KPMG which indicates that the number of companies entering administration has fallen during the first quarter of 2016.
The analysis, taken from notices in the London Gazette, shows that from January to March 2016, the number of companies going into administration fell by 15% when compared to the same period in 2015 – from a total of 327 down to 277. However, when compared to the previous quarter (October-December 2015), the number has remained relatively static.
The figures reflect the continuing downward trend of insolvencies following the 15 year peak reached during the financial crisis of 2008/09. Indeed, the current trajectory suggests that 2016 will eclipse 2015 as seeing a record 15 year low in the levels of administrations across England and Wales.
Blair Nimmo, head of restructuring for the UK at KPMG, said:
“The availability of affordable funding for businesses from an increasingly broad spectrum of lenders has helped businesses to continue operating where they may otherwise have failed due to lack of support from an existing lender or an inability to re-finance as an alternative.
“The growth in alternative finance such as asset-based lending, peer-to-peer platforms and crowdfunding has also played an increasing role in funding UK businesses, particularly where traditional lenders have been unable to get comfortable with a company’s business plan.
“Stakeholders have also become more open to seeking professional advice when their business has started to experience signs of stress. An early appraisal of the options to develop strategy, cut costs, manage working capital effectively or seek new finance has, in many cases, avoided the need for more drastic action or insolvency.”
Whilst there are some small regional variations in the pattern of these insolvencies, the picture is broadly the same across the country.
Sector-wise, the KPMG analysis shows that the building & construction and manufacturing industries are suffering more than most, with other notable sectors experiencing degrees of distress including care homes, temporary manpower & recruitment and retail.
“The economic outlook suggests little short-term change to current conditions and the expectation is that there will be no increase, by sector or geography, in corporate insolvency activity during 2016. That said, the uncertainty in the steel and oil & gas industries obviously give cause for concern, and has the potential for significant fall out.
“While the full impact of a potential Brexit is difficult to predict at this stage, the uncertainty created by the imminent EU referendum could add to the list of risks affecting companies in distress.”