Underlying corporate insolvencies highest for four years

Excluding the effect of ‘bulk insolvencies’, the number of companies entering an insolvency process reached its highest quarterly level for four years, according to new figures released today by the Insolvency Service.

A total of 4,462 companies entered insolvency in Q1 2018, consisting of 3,209 creditors’ voluntary liquidations (CVLs), 783 compulsory liquidations and 470 other insolvencies.

The figures reveal that the underlying number of company insolvencies rose by 13 per cent versus the previous quarter and up by 0.6 per on the same quarter last year.

The majority of insolvencies were creditors’ voluntary liquidations (CVLs) and compulsory liquidations, although administrations numbers rose in Q1 18 by 15.7 per cent versus the previous quarter.

For the 12-month period ending Q1 2018, the highest number of insolvencies were in the construction sector, followed by the wholesale/retail sector.

Graham Bushby, head of RSM’s Restructuring Advisory practice said:

‘While the underlying economy is performing well at present, Brexit uncertainty and nervousness around the impact of trade wars between the major economies are beginning to affect confidence levels. This may be making investors and lenders slightly more cautious when it comes to extending or offering increased credit facilities.

‘These figures also highlight challenges facing the construction sector, which has been hit by increases in labour and material costs and a slowdown in price increases, not to mention the knock-on effect of the Carillion collapse.

‘Shoppers won’t be surprised to learn that high street retailers have also had a hard time of late. The increased costs associated with the rise in the minimum wage, crippling rate rises, the ever growing threat from online and the freezing weather have all conspired to make life pretty tough for traditional high street shops. 

‘Given the prospect of impending rate rises – albeit limited and gradual ones – we could well see corporate insolvencies rise further throughout 2018.’