Q2 2019 insolvency statistics – R3 response

30 July 2019

Commenting on the Q2 2019 (April-June) England & Wales insolvency statistics (published this morning by the Insolvency Service), Duncan Swift, President of insolvency and restructuring trade body R3, says:

Corporate insolvencies

• Underlying corporate insolvencies rose by 2.6% in Q2 2019 compared to Q1 2019, and rose by 11.9% compared to Q2 2018.

"Today's figures are evidence of a difficult period for UK businesses. Tighter constraints on consumers and significant uncertainty about the future of the UK economy and the UK's relationship with the EU are just some of the key factors at play that are making the business climate a challenging one.

"Questions around what Brexit really means have hit investment and growth levels, and led to a degree of economic stagnation.

"In addition to this, consumer confidence is low, as people worry about the weeks, months and even years ahead. This may mean consumers are only buying what they need.

"Businesses in a variety of industries are struggling right now. Retailers are suffering as the world in which they operate changes and more and more people shop online. Manufacturing output and confidence is low. Private and business car sales are down. And businesses which stockpiled items ahead of the original Brexit deadline of 29 March will now be seeing those decisions have an impact on their cash flow levels. Simply put: it's an uncertain, difficult time to be in business right now.

"For some businesses, restructuring through an insolvency procedure is the best means of dealing with stalled growth. Although numbers of administrations, a procedure designed to support business restructure and rescue, have fallen back slightly from last quarter, they are at still their second highest quarterly level since 2014. Meanwhile, the increase in Creditors' Voluntary Liquidations suggests business rescue is more difficult to achieve in the current economic environment, perhaps reflecting greater uncertainty that purchasers can deliver sustainable business turnarounds.

"Any company directors who are concerned about their business or the market conditions it's operating in should seek advice from a knowledgeable and qualified professional source. The earlier they do, the more options they will have for helping their company recover and start to thrive again."

Personal insolvencies

• Personal insolvencies fell 1.3% from Q2 2019 compared to Q1 2019, but rose by 7.2% compared to Q2 2018.

"Although total personal insolvency numbers have dipped slightly, the bigger picture is worth keeping an eye on. The last quarter saw the third highest number of personal insolvencies since 2011. Individual Voluntary Arrangement (IVA) and Debt Relief Order (DRO) numbers have only fallen slightly, while bankruptcy numbers have climbed again. They're now at their highest level since 2014, and tend to be a reasonably good indicator of serious, unsustainable indebtedness. The situation is still serious for the UK's personal finances.

"Although real wages have been increasing recently, they are still lower than they were before the financial crisis. Employment may be low, but it's not necessarily secure for everyone. It may be that debt exhaustion is contributing to the declining growth rate of consumer borrowing - which is growing at the slowest rate in five years - rather than a genuine improvement in personal finances.

"These factors, coupled with economic uncertainty, mean money worries are a fact of life for millions. R3's latest Personal Debt Snapshot, which is a survey of more than 2,000 British adults' personal debt concerns carried out in March, found that 40% of British adults were at least fairly worried about their current level of debt, and that the same proportion (40%) said they sometimes or often struggle to make it to payday.

"R3's research at the end of last year [October 2018] showed one in five British adults (20%) would find it somewhat difficult, very difficult or impossible to immediately pay an unexpected bill for an amount as little as £20, without assistance from an external source. This in itself is worrying, and indicates that many consumers have little financial resilience.

"Anyone worried about their financial situation should get advice sooner rather than later. Non-judgemental, expert and professional help can make the world of difference to someone's finances - not least because it can help them explore their options and give them time to make a considered decision rather than a rushed one."

• Q2 2019 Corporate Insolvency Statistics: https://www.gov.uk/government/statistics/company-insolvency-statistics-april-to-june-2019
• Q2 2019 Personal Insolvency Statistics: https://www.gov.uk/government/statistics/individual-insolvency-statistics-april-to-june-2019
• ComRes interviewed 2,004 British adults online between 29th-31st March 2019. Data were weighted to be representative of all British adults by age, gender, region and socio-economic grade. ComRes is a member of the British Polling Council and abides by its rules. Full tables available at www.comresglobal.com.
• ComRes interviewed 2,042 British adults online between the 17th and 18th October 2018. Data were weighted to be demographically representative of all British adults by age, gender, region and socio-economic grade. ComRes is a member of the British Polling Council and abides by its rules. Full data tables are available at www.comresglobal.com.