More UK firms face insolvency risk than 12 months ago
A higher proportion of UK businesses are at a higher than average risk of insolvency than a year ago, new research shows.
Data from insolvency and restructuring trade body R3 shows that the number of businesses deemed to be facing tough financial times has risen constantly over the past 12 months.
Using credit scores to look at 11 main industry sectors, R3 used Bureau van Dijk’s Fame database to cover the entirety of the UK.
Whereas 25.3% of companies were deemed to be facing an above average risk of insolvency in 2017, that figure has now increased to 39.1%.
In order to define insolvency risk, credit scores of 1‐18 were used to show high risk, while those of 19‐36 show firms that need to exercise caution.
The rising level of insolvency risk comes at a time when there are growing cost pressures on UK businesses, as operational costs have increased considerably in the last year.
Alongside rising labour costs and growing rental outlays, firms in numerous sectors are also facing greater competition, especially in industries that can operate with an online presence.
As well as studying a company’s turnover, R3 also took balance sheets and the track records of directors into account when deciding on levels of risk.
Scotland has the lowest proportion of firms deemed to be at an above average level of risk, with 32.5% of firms in such a position, compared to the UK average of 39.1%.
The trade body has warned that businesses cannot afford to be complacent and has urged firms facing difficulties to seek assistance at the earliest opportunity.
Tim Cooper, chair of R3 in Scotland, added: “Don’t delay if you’re unsure what to do – your firm’s survival could depend on it.
By Phil Smith