More than 100,000 UK businesses are creditors in insolvency cases


More than 100,000 businesses in the UK were owed money by insolvent companies and individuals over the course of the past 12 months, according to figures released by insolvency trade body R3.


The research showed that a total of 113,000 businesses were involved as creditors in an insolvency procedure last year. This represents around 6% of all businesses in the UK.


SMEs were more likely to be owed money by insolvent companies or individuals than larger businesses. Medium sized businesses, defined as those employing between 51 and 250 people, were the most likely to have been put at the risk of exposure to another’s insolvency. Just under one in seven (14%) of businesses in this category had been involved as a creditor in an insolvency case in 2015.


Between 5% and 7% of small businesses (those employing between one and 50 people) had been creditors in an insolvency case over the past 12 months. By contrast, only 4% of large businesses with more than 250 employees had found themselves in the same situation.


Some 4% of micro-businesses employing between two and five people had been involved as a creditor in more than five insolvency cases in 2015. This was the highest incidence of that situation for any business size.


The UK insolvency system is generally considered to be one of the most robust in the world and professional insolvency practitioners can help guide all parties through the process. Even so, it is not always possible for creditors involved in an insolvency case to receive all of the money they are owed and this can have a knock-on effect for the creditor. The problem can be particularly serious for smaller businesses who are most at risk to exposure and who may also have smaller margins and cash-flows.


Businesses should take care to assess risks and take preventative measures before dealing with other companies and individuals. Businesses will often go for growth by accepting new customers without adequately checking their creditworthiness. This could be counter-productive in the long run as it could increase their chances of being involved in an insolvency case.


By Phil Smith


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