It’s fair to say that this year has been a challenging one to navigate for many large corporates and SME businesses across the UK. Political unrest and uncertainty surrounding the UK's future with Europe certainly didn’t help improve trading conditions or consumer confidence last quarter when you review the statistics from the Insolvency Service on the number of insolvencies registered in England & Wales.
It’s hardly a surprise when you consider the events of Q3 which saw Boris Johnson elected by his own party to take over from Theresa May as PM, a suspended parliament and a newly negotiated Brexit deal. None of which are conducive to generating confidence and stability in the economy.
Even on a global scale, industrial recession and a slowdown in economic growth has impacted the number of Western European businesses going bankrupt this year. Even the US has seen a reversal in their 10 year-long downward trends of corporate bankruptcies with higher tariffs on Chinese imports impacting on the now increased number of US corporates going bust.
However, here in the UK, we have experienced one of the highest increases in corporate insolvencies globally as these latest statistics from the Insolvency Service will demonstrate.
On the corporate side, an increase in Administrations and CVL s meant that total company insolvencies rose in Q3 2019 compared to Q2 2019. The liquidation rate actually fell in the 12 months ending Q3 2019, primarily due to a decrease in compulsory liquidations. Whilst still not able to compete with the numbers during the recession of 2008/2009, Q3 Administrations were the highest for several years and 20% up on the previous quarter.
The 4,355 company insolvencies for this quarter was actually an increase of 1.6% compared to last year for the same quarter. This quarter saw the first recorded Receivership since Q1 2018, which is quite iconic. In general, usage is quite limited because it’s restricted to certain types of company or to floating charges which were created before September 2003.
By industry, the accommodation & food services industry saw the largest increase in underlying insolvencies for the 12 months leading up to Q3 2019. However, as has been the trend for this year, the construction industry had the highest number of new company insolvencies for the 12 months leading up to this most recent quarter.
2019 has seen a significant increase in the total number of individual insolvencies. This has been mainly shown within the increased number of Individual Voluntary Arrangements (IVAs). In total there were 30,879 individual insolvencies in the UK which is an increase of 22.7% from the same quarter in 2018.
This now takes personal insolvencies to the highest rate in 8 years. The reasons for this are unclear but the increased number of individuals engaged with insecure employment such as zero-hour contracts coupled with economic uncertainty is likely to be a factor.
While average pay has been increasing gradually this has only been an increase of 0.9% when factoring in recent inflation rates. Duncan Swift; current president of the R3 Association commented on this issue saying “Although real wages have hit a recent high, they are still lower than they were before the financial crisis. Unemployment may be low but it’s not necessarily secure for everyone.”
What may be more troubling is the sharp increase in personal insolvencies for young people aged between 18 and 25. Research by RSM has shown that the number of young people becoming insolvency has increased 10-fold in the last 3 years. Their argument is that this could be due to young people living in an era of low-interest rates and easy access to credit.
In our last Market Insights, we reviewed some of the high profile restructures and corporate failures that had taken place in the first few months ...Read more
If we had a pound for every time we’d read about it being a candidate’s market, well we’d have a lot of pounds.We’ve all read the articles, heard ...Read more
Over the past 3 months we have continued to see job numbers increase in legal BD & Marketing, yet candidates remain in short supply, particularly f...Read more