Company insolvencies on the rise

Date: 31 October 2018

Company insolvencies on the rise

The latest government data reveals that company insolvencies have increased in the third quarter of 2018.

According to The Insolvency Service, a total of 4,308 UK companies entered insolvency in Q3 2018; of these, 72% were voluntary liquidations while 17% were compulsory liquidations. It means that insolvencies were up by 9% compared to Q2 2018; and they have increased by 19% compared to the same quarter last year.

Commenting on the figures, Nick Levine, head of enterprise at accountancy body ICAEW, said: "It is unsurprising that once again businesses are continuing to struggle throughout 2018 and I don't expect things to improve going in to 2019.

"It is not only high street stores suffering. The hospitality industry is also seeing an increasing amount of businesses go insolvent which is potentially being fuelled by migrant hospitality workers leaving the UK. It is important that hospitality businesses in the UK continue to recruit as they play an important role in the UK economy."

Business rates remain a major problem for many small firms, he said. "Although Philip Hammond announced in the Budget that he will reduce business rates for companies that have a rateable value of £51,000 or below, many others will continue to suffer."

Also this week, a new study suggests that small businesses run by women are less likely to go under. The research, conducted by insolvency practitioners KSA Group in conjunction with Creditsafe, looked at three million UK SMEs to find out if the insolvency rate was higher for male or female-run companies.

It was found that the insolvency rate of male-dominated businesses was 0.34% and those in female-dominated businesses was 0.20%. It means that the insolvency rate is 70% higher in male-run businesses. However, the authors of the report have warned that a variety of factors may explain the discrepancy.

"It is apparent that the insolvency rate is higher in male-run businesses, but this may be due to a number of factors that have nothing to do with whether men are inherently worse at running businesses than women," said Robert Moore of KSA Group. "It may well be that the businesses that tend to be more likely to become insolvent due to the nature of the industry or recent economic events are coincidently run by men."

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