The latest corporate insolvency statistics released for England and Wales confirm that the number of businesses entering insolvency in Q3 rose 1.1% compared with the same quarter last year.

The figures unveil that an estimated 3,633 companies entered some form of formal  insolvency proceedings during the Q3 of 2016. This represents a 2.2% increase between Q2 and Q3.

Q3 2016 Company Insolvency Overview

 

cwqukhoweaarb7w

 

Types of Business Insolvency Procedures

Creditors Voluntary Liquidation (CVL)

In Q3 the number of companies entering into a CVL increased by 2.2%  compared with the same quarter in the previous year. CVL’s  increased by more than 5% on Q2.

Compulsory Liquidations
Businesses entering into compulsory liquidation increased by 2.4% compared with the same quarter in the previous year, but the figures show a reduction of more than a 4% since Q2.

Administration
In Q3, over 350 companies filed for administration, which shows a slight increase compared with the same quarter in the previous year.

Company Voluntary Arrangement (CVA)

75 companies entered into a CVA in Q3, which is a third less when compared with the same quarter in the previous year.

 

Is Brexit to blame?

Some analysis suggests that the Brexit vote is to blame for the slight increase, but is this really the case? Our insolvency practitioner Mike Gillard offers some more insight on the insolvency statistics.

“The 5.5% rise in CVL’s indicates that it is the business owners themselves who  are deciding to close their businesses, the Brexit vote has lead to uncertainty in the economy, which is never a good thing, but the effects of the vote have yet to be seen.

“Clearly the weakening of the pound has put pressure on business owners who are dependent on imports, it is likely these increased costs will be passed onto the end consumer in the coming 12 months, which will have a knock on effect on prices”

There could be some good news however, as the liquidation rate was at the lowest level since comparable records began however Mike Gillard believes that this does not necessarily show the true picture.

“Although liquidations are at a low rate, this may reflect a lack of opposition by HM Revenue & Customs to strike offs at Companies House. In years gone by a higher level of current strike offs may have been opposed by HM Revenue & Customs, which would have the knock on effect of an increase in Compulsory Liquidations & CVL’s”

Help at the first sign of financial difficulty

Cash flow difficulties can be the first sign that a business is in difficulty, and if nipped in the bud sooner rather than later, the pressure can be alleviated quickly, without the need to resort to a formal insolvency procedure, if businesses are facing financial difficulty, the key is to take professional advice early.