Insolvency figures increase after Brexit vote

24/01/2017

Results from a new KPMG analysis have revealed that, for the first time in six years, the number of insolvencies has begun to rise among British businesses. This news follows an uplift in companies entering administration in the latter half of 2016.

Notices published in the London Gazette have shown that 1,174 businesses, or groups of, filed for administration in the UK in 2016. In contrast, 2015 saw a 15-year low of 1,111.

Blair Nimmo, KPMG’s UK Head of Restructuring, said: “2016 was a game of two halves, with the first six months of the year continuing the downward trend in corporate insolvencies.

“However, numbers started to creep up in the second half of the year, no doubt in part a reflection of the uncertainty created by the result of the EU referendum and the fluctuations seen in the currency markets.”

Of all sectors, construction looks to have been significantly affected – with 174 firms entering administration – as a result of increased import prices for essential raw materials putting pressure on profit margins. Retailers, social care and nursing homes and businesses in the hotels and leisure sectors were also particularly affected.

As for 2017, Nimmo has forecasted the amount of insolvencies to remain steady, saying: “While there are many positive signs for 2017, including continued GDP growth, low unemployment and low interest rates, and increased order books in some sectors, I still sense a degree of uncertainty such that I suspect businesses will continue to adopt a cautious approach until matters become clearer after the triggering of Article 50. Inflationary pressures will also start to play their part.

“So while I do not foresee any sudden spike in insolvency numbers on the horizon, I would not be surprised to see the slight steady uptick in administrations continue over the months ahead.”

In a week which saw the Supreme Court grant Parliament the power to allow official Brexit negotiations with the rest of the EU to commence, the uncertainty caused by the Brexit vote looks set to remain for some time yet as businesses try to interpret what it all means for them.

It therefore places yet more emphasis on businesses to ensure their credit control procedures are as efficient as possible, and that they know the financial position of each customer they trade with on credit.

To ensure your business is doing all it can to safeguard its cash flow, take a look at our blog on how to create an effective credit policy.