SME business insolvencies rise again

The number of businesses that became insolvent in the first three months of 2019 rose by 6.3 per cent compared to the previous quarter.

The figures, released by the Government’s Insolvency Service last week*, demonstrate the immense strain that small and medium sized businesses (SMEs) are under as a result of rising employment costs, high business rates and significant political uncertainty due to Brexit.

The areas recording the most insolvencies include the construction, administration and retail sectors, where higher wages and employer pensions auto-enrolment costs are proving a huge burden on businesses.

The construction sector, which continues to struggle as a result of the late payments culture, recorded the highest level of insolvencies, up 0.6 per cent from the 12 months ending in the fourth quarter of 2018.

While company insolvencies are worryingly high, there was a fall of 8.9 per cent in the number of self-employed individuals who suffered from bankruptcies in the fourth quarter of last year, but this remains higher than the same period in the year before.

Federation of Small Businesses (FSB) National Chairman Mike Cherry, comments: “The self-employed community, who are 4.8 million-strong, are still denied basic support in too many areas.

“FSB’s own research has found that small businesses are spending around 15 per cent more on the likes of taxes, levies and employment obligations than they were six years ago.

“Ongoing uncertainty is a critical issue for small firms and the self-employed, and central to this is the unknown nature of what the UK’s relationship will look like with the EU.

“SMEs are under the cosh more than ever and it’s time that action is now taken to prevent more businesses going insolvent in the future.”

There are many underlying reasons why companies may fall into administration or insolvency. Here are six key signs your business may be at risk of over-trading:

  1. Outgoings exceed actual cashflow and you are borrowing money to keep up
  2. Profits are down and margins are tight
  3. Employees are over-worked and unhappy – productivity is falling
  4. Emphasis has shifted from quality to quantity
  5. Customers are complaining and losing confidence
  6. Infrastructure, systems and processes are buckling under the pressure of the increase in demand for your product or service

If you have any concerns about your business then it is beneficial to fully understand the possibilities for restructuring as early as possible to allow appropriate planning.

Our experts at BM Advisory, a Beavis Morgan group business, are available to review your situation and talk through the various options with you. Contact Mike Solomons, Andy Pear or your usual Beavis Morgan partner to arrange an initial free consultation.

* Company insolvency statistics, Q1 January to March 2019