The latest statistics have come out regarding the number of companies that entered insolvency proceedings.
In summary, there was an increase in company insolvencies when compared to Q4 2018 with the exception of compulsory liquidations ( winding up ). There were 4,187 total underlying company insolvencies in Q1 2019; this is 6.3% higher than in Q4 2018. Compared to the same quarter last year, this was an increase of 5.1%. This is the second highest underlying level of insolvencies in any quarter since Q1 2014
This rise was driven by increases in CVLs which increased by 6.2% compared to Q4 2018 and administrations which were up 21.8%. CVAs also increased by 43.1%. Compulsory liquidations fell in Q1 2019 by 2.7%. However, when comparing to the same quarter last year CVAs were down by nearly 8.8%. There was a very low level of CVAs in the final quarter of 2018.
Overall the liquidation rate is very low with only 42 in 10,000 active companies going into liquidation. Perhaps the biggest takeaway is the rise in administrations which is the highest it has been in 5 years. In our view this has been led by larger businesses finally being unable to get any more credit from investors, banks or their private equity owners and being put into administration.
Due to administration being a more costly and complex process it is usually for businesses with a reasonable amount of assets and a good chance of being able to continue to trade. High profile administrations have been Debenhams and recently Four Seasons Health Care. In these instances both are still trading.
Insolvency by industry
By industry it was the “wholesale and retail trade; repair of vehicles” industry grouping which saw the largest increase in underlying insolvencies, with 67 extra cases compared to the 12 months ending Q4 2018. This includes High Street shops which have seen a number of high profile insolvencies recently as they suffer from increased costs and lower consumer spending.
Insolvency by region
Legislation relating to company insolvency in Scotland is devolved. The statistics are released by the Accountant in Bankruptcy, Scotland’s Insolvency Service,
There were 275 company insolvencies in Scotland Q1 2019
This was an increase of 16.0% compared to the same quarter of the previous year.
Due to the difference in rules in Scotland there are fewer creditors voluntary liquidations as winding up petitions are often presented earlier in the process. For more information on the differences then read this page
Commenting on the statistics Stuart Frith, president of insolvency and restructuring trade body R3, said:
“Businesses have also faced uncertainty around Brexit and the future of the UK’s trading relationship with the EU. This was particularly acute in the first quarter of this year as we approached the original ‘Brexit Day’ on 29 March. No Deal preparations put pressure on businesses to stockpile goods and materials, in turn putting pressure on their cashflow. Meanwhile, businesses reliant on EU trade saw orders and investment stall."