Insolvencies in England & Wales reach 7-year high

The Insolvency Service has today released figures showing how many bankruptcies, debt relief orders (DROs) and individual voluntary arrangements (IVAs) took place in the fourth quarter of 2018 across England and Wales.
The statistics show that UK insolvencies surged in 2018, as consumer confidence impacted spending behaviour and the political and economic uncertainty continued to impact people’s daily lives, both personally and on the business front. 

Personal insolvencies hit the highest level for seven years, reaching a total of 115,299 over the course of 2018. There were 34,108 individual insolvencies in the fourth quarter of 2018, an increase of 34.8 per cent on the previous quarter. DROs reached 27,683 in 2018, an increase of 11.2 per cent when compared with 2017.

Stuart Frith, President of insolvency and restructuring trade body R3, comments: “Personal insolvency numbers have been rising steadily every year since 2015, and 2018 was no exception. As banks and other lenders have tightened their credit standards in response to the Bank of England’s concerns around consumer over-indebtedness, many people have run out of road.

“Savings levels are painfully thin, exposing people to financial upsets. As an illustration of this, recent research from R3 and ComRes found that one in five British adults (20 per cent) would find it somewhat difficult, very difficult or impossible to immediately pay an unexpected bill for an amount as little as £20, without assistance from an external source.”

Alex Collinson of the TUC, the Trades Union Congress, tweeted that he is concerned that the UK is heading towards a debt crisis and has called on the government to act: “In December, it was revealed that household debt has hit a record high. Today’s insolvency stats show that, in 2018, the number of IVAs has also hit a record high. The government needs to get a grip on this growing debt crisis.”

On the business front, the number of companies hitting financial trouble has also risen, with company insolvencies rising in 2018 to 16,090, the highest level since 2014 and a 10 per cent increase on 2017. All types of company insolvency increased in 2018 compared with 2017, except administrative receiverships.
Looking at industries, the construction and retail sectors suffered the brunt of the insolvencies across the UK last year, with a number of high profile retail chains closing shop and a large number of building companies going under. 

Speaking to the Guardian, Karen Hendy, partner at City law firm RPC, says she fears more retailers will fall into insolvency in 2019: “The retail landscape could get worse before it gets better. A poorly handled Brexit may see even more high-profile casualties in the sector.
“Unfortunately, there seems to be very little good news on the horizon for retailers. The National Minimum Wage will rise another 4.9 per cent in April, and Brexit is a drag on consumer confidence.”

Reflecting on the corporate insolvency statistics, Stuart Frith, adds: “The pressure point for businesses most frequently cited by our members is weak consumer demand. People just don’t have much spare cash at the moment, reflected in the rise in the number of personal insolvencies also confirmed today.

“Although recent government figures showed that the weekly amount spent by households has hit its highest level since 2005, much of that expenditure went on housing and transport, with less left over for consumer outlay. This is having a big impact on consumer-facing businesses, such as retailers and the restaurant sector.

“This also spells bad news for businesses at one remove from the consumer, such as manufacturers supplying consumer products, shop fitters, or logistics firms. Every business is part of a network and one struggling business will affect others.”

The R3 says it would “encourage directors of companies which are finding current market conditions tough to seek out knowledgeable and qualified advice from a professional source. The earlier a company seeks advice, the more options it will have”.

This is certainly sound advice for both businesses and individuals with financial concerns and our experts at Beavis Morgan Group business BM Advisory are available to help. Contact Andy Pear or Mike Solomons to arrange an initial confidential consultation which will be free of charge and without obligation. Together we will discuss your individual situation and advise on the best course of action.

It is essential that UK SME business owners maintain effective management of their company’s working capital and put processes in place to survive and thrive in challenging times. Our specialist advisers at Beavis Morgan are on hand to provide guidance and strategic advice to help in formulating plans for your business in order to strengthen its prospects of success, achieve growth and maximise wealth. For more information, contact Steve Govey or your usual Beavis Morgan Partner.