Data from the Office for National Statistics (ONS) has revealed that the underlying number of companies entering insolvencies rose by 15 per cent in the last quarter, driven by an increase in creditors’ voluntary liquidations.
Adding to this, there were 25,250 personal insolvencies in England and Wales in the third quarter, up 7 per cent – 3,800 bankruptcies, 15,150 individual voluntary arrangements (IVAs) and 6,300 debt relief orders.
The number of IVAs reached their highest level since they were introduced in 1987.
According to the insolvency trade body R3, businesses are being impacted by rising costs, partly brought about by last June’s referendum.
R3 president, Adrian Hyde, says: “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 over 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 on to 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.”
With the increase in the number of businesses showing signs of distress, it is more important now than ever that businesses consult a specialist adviser who will ensure they have the right structures in place to respond quickly to the changing market conditions.
Our SME business experts at Beavis Morgan are able to guide you on your strategy, help you navigate the challenges that lie ahead, and assist in making those all-important business decisions that will have the greatest impact on future success. We work with individuals not only to set up their businesses, but to guide and mentor them through the various challenges of each business lifestage, always seeking opportunities to reduce their tax bill, and enhance wealth accumulation and succession planning, in order to maximise your personal wealth and reap the rewards from all your hard work.
In turn, if you have any concerns about your personal or business financial situation, our restructuring, recovery and advisory experts at our partner business BM Advisory are able to assist. We specialise in finding innovative solutions for individuals and businesses in distress.
Further reading: Caution urged ahead of interest rate decision