Insolvency rates up in Q1 2018
Insolvency rates in Q1 2018 have risen dramatically compared to Q4 2017 according to the latest government statistics.
These figures correspond with the current research from the Office for National Statistics (ONS), which indicate the UK market is undergoing the slowest period of GDP growth in the last five years.
In this article, we'll introduce you to the most recent statistics. Then, we'll explain how these compare to previous quarters, and which industries have been most drastically affected.
What has happened to insolvency rates in Q1 2018?
Here, we can see how insolvencies affected companies in England and Wales during Q1 of 2018.
These new figures show that the total number of new company insolvencies during Q1 2018 was 4,462. This total includes:
- Compulsory liquidations: 783
- Creditors' voluntary liquidations: 3,209
- Administrations: 367
- Company voluntary arrangements (CVAs): 102
Creditors' voluntary liquidations represented 72% of total insolvencies, while compulsory liquidations comprised 17.5%. All other types represented just 11.5% of insolvencies in Q1 2018 when combined.
How does this compare to insolvency rates in previous quarters?
Here's a brief overview of how these insolvency rates compare to figures published previously:
- Total company insolvencies fell 1.1% compared to Q4 2018, but rose 12.6% compared to Q1 2017.
- Compulsory liquidations rose by 26.3% compared to Q4 2018, but fell 6.6% compared to Q1 2017.
- Creditors' voluntary liquidations fell 8.9% compared to Q4 2018, but rose 19.7% compared to Q1 2017.
- Administrations rose by 15.7% compared to Q4 2018 and 2.3% compared to Q1 2017.
- CVAs rose by 85.5% compared to Q4 2018 and 18.6% compared to Q1 2017.
When considering these figures, you should bear in mind that CVAs reached a 20-year low in Q4 2018. Therefore, a comparatively small rise in overall numbers (47 in total) skews the statistics somewhat. The current rate correlates with the prevailing trend of figures recorded going back to Q1 2015. The CVA has become a more popular form of insolvency of late for the retail sector.
Which industries have seen the highest rates of insolvencies?
As you might have inferred from recent headlines, the industries that have been worst affected by insolvencies during Q1 2018 have been construction, retail and (to a lesser extent) vehicle repair.
In the construction industry, output has slowed to just 0.1% (The Guardian). Carillion was the largest construction company to fall. However, this also appears to have pushed suppliers and other associated businesses towards insolvency.
The retail sector saw a host of household names enter statutory insolvency procedures. This included Toys R Us and electronics retailer Maplin.
However, in better news for business-owners, a host of companies have looked to restructure, and many have been successful. This trend was most prevalent in the casual dining sector.
With insolvency rates on the rise, it pays to keep a close eye on the market and develop a contingency plan in case trade winds aren't favourable. If you are in an 'at-risk' sector or have concerns about your company specifically, read our Worried Directors Guide.