A new analysis by KPMG shows that the total number of companies in England and Wales entering administration during the second quarter of 2018, has fallen sharply – quite surprising considering the high-profile insolvencies which we are seeing to hit the headlines.
The KPMG study looked at notices in the London Gazette. Compared to the number of companies entering administration during the first quarter of 2018, the figures fell 13%. Looking year-on-year, the figures rose 1.6%.
Blair Nimmo, head of restructuring for KPMG in the UK, spoke about how the fall in administrations may appear surprising to some, especially those who have been following the recent high street brands who have been hit, for example, House of Fraser and Mothercare.
It is a challenging time for companies among the casual dining and retail sectors, who face changing consumer spending attitudes and increased costs due to business rates and living wages rising. Though CVAs and pre-pack administrations have helped some, for example, Gaucho and Homebase, site closures and job losses are still inevitable.
‘’Additionally, the much-publicised pressures on the construction sector continue to impact businesses up and down the supply chain, both large and small.’’ Carillion provides a great example of this, who have left a domino effect following their collapse.
New pressures are also hitting new sectors. Take high street agents for instance. A rise of online-only agencies, with falling house prices, a slowdown in sales and legislation changes all contribute to the recent challenges. Nimmo states he would ‘’not be surprised to see operators across this sector struggle over the second half of the year and beyond.’’
The most recent figures show a relatively optimistic picture for most businesses. Nimmo believes ‘’adopting a long-term cautious approach appears to be paying off for the majority of firms, although sectoral-specific challenges and broader global economic changes will inevitably force some businesses to reconsider their operations and potentially restructure their organisations to improve efficiencies’’.
Administrations are mainly for larger companies due to their cost and complexity but the last insolvency statistics showed that liquidations were also following a similar pattern. The statistics show that 70% (2731) of all company insolvencies were in the form of Creditor Voluntary Liquidations, which had fallen by 0.5% compared to Q1 2018, but has risen 14.6% from 2017 Q2 figures. Likewise, Compulsory Liquidations were found to have risen to 752 – a rise of 14.6% compared to 2017 Q2 and a decrease of 0.4% compared to Q1 2018.