Corporate Insolvencies on the rise – Q2 2019 Insolvency

It seems like every week now there is a major retailer announcing to the market a significant drop in revenue, a profit warning and the need for advisors to assist with a plan for major restructure.

Debenhams, Jack Wills, New Look, Mothercare, Monsoon, House of Fraser are some of the bigger names that have struggled to cope this year with the ever-increasing demands of the UK high street, but they are not alone.

Many SMEs have found the current economic climate just too challenging to survive and this has certainly been reflected in the latest government insolvency statistics spanning April to June of this year.

Corporate insolvencies

The total underlying number of company insolvencies increased in Q2 compared to the previous quarter with company voluntary liquidations (CVLs) attributing to 70% of the total corporate insolvencies registered.

CVL procedures were 6.9% higher than in Q1 and were up 12.5% compared to the same quarter of last year.

As for Administrations, there were 400 registered in Q2 making it the second highest quarterly level since Q1 2014. While down on the first three months of 2019 by 11.4%, the trend across H1 has unsurprisingly been that many organisations have found trading conditions too problematic to navigate and ultimately unsustainable.

The construction, manufacturing, other service activities, wholesale and retail industries, were once again at the top of the pile for sector struggles, but the accommodation and food services sectors saw the largest change with 74 extra cases (3.4% increase) recorded compared to the 12 months ending Q1 2019.

Personal insolvencies

A quick look at personal insolvency rates shows us that there was a small drop in Q2 from Q1 but still an overall rise on last year’s April to June period with a 7.2% increase.

The drop off from Q1 is negligible when you consider that last quarter, we saw the third highest number of personal insolvencies since 2011. The number of individuals in England & Wales this year that have required financial assistance in the form of IVAs and Debt Relief Orders has also increased.

The cost of borrowing in recent years has been highly favourable to the consumer with low interest rates and easily accessible unsecured credit. However, stagnation in real wage growth and increases in living costs has only contributed towards a climate in which many people have struggled to stick to their repayment terms.

The credit bubble is certainly close to bursting for many households and with plenty of uncertainty in the current economy, there are no signs of individual insolvency rates reversing in the short to medium term.

Overview of Q1 insolvency statistics

Insolvency & Restructuring Market Insights Q3 2019