Construction and Retail industry trading debts force bankruptcies
Personal bankruptcies from business debts in the construction sector rocketed by 24% in the first three months of this year, according to official figures, and highlighted by insolvency trade body R3. A rise of 17.5% was recorded in the wholesale and retail sector, and overall there was an increase of 13% across all sectors.
R3 President Frances Coulson said:
“Trading related bankruptcies will be individual-owned, small businesses not covered by limited liability, who either live or die by their financial health. They have less flexibility in doing deals with bankers or offering debentures and less security - making them an easier target for creditors.”
The 2,579 trading related bankruptcies is now heading back towards the peak of 2,798 in Q1 2009 during the last recession.
“It is troubling that we are heading back to levels seen during the previous recession and shows just how tough conditions are for small businesses. Some creditors, including HMRC, are now deciding they have had enough. These increases are running ahead of the business insolvency statistics and could act as a worrying trend.”
These findings are mirrored in R3’s Business Distress Index which revealed that construction and retail were the two sectors registering the most ‘distress’ in seeing reduced profits. Retail businesses were more likely than any other to be concerned about their debt levels (41%). Eight percent of those in the retail sector say that they are very likely to enter into insolvency in the next twelve months – this compares with a cross-sector average of two percent.
Frances Coulson concluded:
“The impact of consumers reining back their spending on the retail sector is now well documented as people concentrate on paying off debt. The construction sector also continues to suffer as a result of fewer building projects in public and private sectors. We have already seen vast redundancies in the sector during the recession and it seems as though cut backs are not abating as construction businesses cut their cloth to suit reduced demand.”
The same figures from the Insolvency Service registered a consecutive quarter increase in corporate insolvency levels, but not the dramatic rise shown in trading related bankruptcies.
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Notes to editors:
- For the official Insolvency Service statistics on trading related bankruptcies click here .
- R3’s Business Distress Index: Methodology note: BDRC Continental conducted 502 telephone interviews with small, medium and large business owners and Financial Directors between 6th and 16th June 2011. Quotas are set by size, region and sector and the data weighted to the profile of UK businesses. The respondent in each case is a senior financial decision maker.
R3 Press Office