Third quarter insolvency figures reveal mixed picture
Company insolvencies decreased in the third quarter, according to the latest figures from the Insolvency Service, but it doesn’t paint the full picture.
Some 4,152 companies entered insolvency between July and September, down 12% on figures for the previous quarter.
However, a number of connected personal service companies entered insolvency in the second quarter and that resulted in an unusually high total for the period.
When those personal service companies are excluded from the latest figures, the underlying insolvency rate jumped by 15% quarter on quarter, and by 14.5% from a year earlier.
Of the companies to enter insolvency in the third quarter, 3,087 were creditor voluntary liquidations and 665 were compulsory liquidations.
The underlying number of creditor voluntary liquidations was up 22.2% quarter on quarter, and rose by 21.2% from the third quarter in 2016.
Examples of compulsory liquidation were down 2.1% between July and September, but were 4.6% higher than the same period a year earlier.
Administrations and company voluntary arrangements fell meanwhile, but sit comfortably within medium-term trends according to the Insolvency Service.
Eleanor Temple, the Yorkshire chair of insolvency and restructuring trade body R3, said the latest figures show a return to a trend of growing insolvency numbers that has existed since mid-2016.
“The prolonged fall in insolvencies we saw between 2010 and 2016 appears to have begun to change direction,” she explained.
She added that corporate insolvency figures have “bounced around” in the last few quarters as a result of tax changes, inflation rates and economic activity.
Pension auto-enrolment, rising operational costs, greater business rates and uncertainty following the EU referendum have all impacted on cash flows and caused concern among small business.
R3 have warned that a number of businesses operating on tight margins could be pushed over the edge when interest rates rise.
Figures highlight that businesses displaying signs of growth are declining, while a greater number are showing signs of distress.
All of the factors are suggestive of an economy that is showing signs of resilience, but it is unclear how long it will last.
By Phil Smith