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Do the rising figures of corporate insolvencies tell the whole story?

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John Cullen - Menzies Accountant

John Cullen – Insolvency Partner

With a rise of 0.7%, the number of corporate insolvencies grew from 17,317 in 2017 to 17,439 in 2018, showing a clear rise in the number of firms failing in England and Wales. Compared to 2017, the number of administrations also rose by 11.2% and CVAs increased by 16% in 2018.

Additionally, Q4 2018 followed the same trend with a 9.3% increase in corporate insolvencies on the previous quarter, which brings this number up to 4,725.

This increase was anticipated and reflects the significant upward trend in activity levels during the past few months. However, he believes that the full picture might not be showing yet due to the lag effect in appointments.

The recent drop in consumer confidence is beginning to impact spending behaviour across the economy. Although several sectors are notably affected, among them the construction, hospitality & leisure industries, the change in spending behaviour has particularly negatively influenced the retail sector where many are also still coping with historic rental agreements undermining their profitability.

Brexit uncertainty and political instability is discouraging consumer spending – creating an incredibly challenging trading environment which will probably cause the number of corporate insolvencies to continue to rise in 2019.

In addition to corporate insolvencies, the number of individual insolvencies in England and Wales also soared in 2018, reaching its highest level since 2011. In 2018, there were 115,299 individual insolvencies – a 16.2% increase on the previous year – with 34,108 of these individual insolvencies occurring in Q4 2018, up a staggering 35% on Q4 2017.

So what does this all mean?

It does appear that the economic conditions are becoming more challenging. The strong employment figures provide some sunshine in an overcast outlook so businesses should ensure that they continue to manage risks actively in the coming months.

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