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© tom_schmucker dreamstime.com Analysis | August 11, 2016

Declining corporate insolvencies in the UK

Insolvency statistics for England and Wales, for the period April to June 2016, show that total company insolvencies were lower than the previous quarter, and decreased on the year. This was mainly driven by a decrease in compulsory liquidations.
Andrew Tate, president of R3, the trade body for insolvency professionals, cited the cheapness of the cost of borrowing and high level of creditor forbearance as key factors for a fall in corporate insolvencies, along with the work of the insolvency and restructuring profession. It is still thought to be too early to glean any ‘Brexit effect’.

“The cost of borrowing remains incredibly cheap for businesses and the last quarter saw better than expected GDP growth. These factors, combined with the high levels of creditor forbearance we have seen since the financial crisis, mean it’s not a surprise that the trend of falling corporate insolvency numbers has continued.”

“Other factors have helped bring insolvency numbers down, such as the rise of non-statutory restructurings. More companies are looking to repair finances outside of formal insolvency procedures and take action before it’s too late. Again, creditors, particularly banks, have played a role in pushing struggling debtors to seek help from the insolvency and restructuring profession before an insolvency procedure is their only option.”

“There is a possibility that uncertainty about the outcome of the EU referendum could have put some businesses in serious financial difficulty. And although it came at the end of the quarter, the result itself may have caused some businesses immediate problems. However, any ‘Brexit’ effect would be limited to a handful of companies, for now at least. Gloomy confidence indicators published in the last few weeks do not bode well for future insolvency numbers.”

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