Insolvencies increase in Q4 2018 latest figures show

The latest insolvency statistics have been published by the Insolvency Service for the fourth quarter of 2018 showing that the number of company insolvencies in 2018 increased in 2018 to 16,090 the highest level since 2014. Corporate insolvencies (seasonally adjusted) fell by 9% in Q4 compared to Q3 but since Q4 2017 had still increased by 11%. The only type of insolvency that didn’t increase in 2017 was administrative receivership.

Since 2014 numbers of insolvencies have been relatively steady but 2018 saw levels of insolvencies reaching levels last seen in 2014. The reason cited mostly is poor consumer demand as many consumers do not have much disposable income, highlighted by the increase in personal insolvencies. Reduced disposable income is impacting consumer-facing, non-essential businesses, such as restaurants.

The lack of demand in certain industries is also harming others through reduced derived demand. Restaurants are purchasing less food because the demand for their services is dropping which in turn is also affecting other industries such as farmers and local butchers. Insolvencies of suppliers often lead to problems further down the supply chain with other businesses taking ‘financial hits’ as a result of suppliers insolvencies.

The current political situation (read “Brexit”) means that businesses are putting off large purchases citing business uncertainty as the reason, which is again harming the supply chain.

The public service provision sector may also take a hit in 2019, with businesses, social enterprises and charities to be hit by reductions in government funding or subsidies being cut. These sectors are also likely to have to pick up the slack for work the public sector cannot carry out because of a lack of resources.

Throughout 2018 R3’s members reported an increase in demand for their services – from advice through to formal insolvency procedures which has also continued since the start of 2019. Latest figures from the FSB are also suggesting that small businesses are struggling to deal with rising employment costs, unfair business rates and uncertainty about the political uncertainty of the country.