Change in direction for corporate insolvency numbers
Adrian Hyde, president of insolvency and restructuring trade body R3, has commented on the new Q3 2017 England and Wales insolvency statistics published by the Insolvency Service.
He said: “Underlying corporate insolvencies rose by 15% from Q2 to Q3 2017, and are 15% higher than this time last year.
“Corporate insolvency numbers have bounced around over the last couple of quarters as a result of the impact of tax quirks and timely economic boosts, including summer’s surprise drop in inflation. This quarter’s rise in underlying insolvencies, however, moves things back towards the trend of growing insolvency numbers we’ve had since the middle of last year. The prolonged fall in insolvencies we saw between 2010 and 2016 appears to have begun to change direction.
“Businesses have faced a number of fresh challenges during the last year. Increasing input costs caused by post-referendum inflation increases and a weaker pound, a rising national living wage, the added costs of pensions auto-enrolment and, for some businesses, rising business rates will have hurt bottom lines.
“Some of these added costs will have been passed onto customers, but reliance on consumer confidence isn’t necessarily a recipe for long-term financial health. Consumers’ ability to absorb price rises is limited, and with spending fuelled by consumer debt, potentially unsustainable. An interest rate rise is just around the corner, too. Although it may be a small one, it may be too big for those businesses and their customers already on the edge.
“R3’s own statistics on the growth and distress levels reported by businesses show the numbers of businesses with signs of growth have fallen from recent record highs, while the numbers of businesses with signs of distress are increasing from recent record lows.”