South East: More companies at risk as economic challenges grow
South East businesses are now at greater risk of insolvency than at the start of 2017, according to new research by the southern branch of restructuring and insolvency trade body R3.
July’s figures, compiled using Bureau Van Dijk’s Fame database, show that nearly one in three businesses in the region – 30.2% – are now at higher than normal risk of insolvency. This is the equivalent to over 157,000 companies and contrasts with January’s figure, which was over 3 points lower at 27.1%.
The R3 Southern research also highlights that technology/IT and professional services continue to be among the highest risk sectors in the South East, with over a third 35.3% and 34.2% respectively – of business at above average risk of insolvency.
Over the past month, all sectors monitored by R3 show an increase in companies with an elevated risk of insolvency, with the biggest increases including retail, manufacturing and construction.
Mike Pavitt, chairman of the Southern Committee of R3 and corporate restructuring and insolvency partner at Paris Smith LLP solicitors, Southampton commented: “Having been flat last year and having fallen slowly from a post-financial crisis peak before that, corporate insolvency numbers were starting to increase again at the start of the year.
“Low interest rates and creditor forbearance have helped keep corporate insolvency volumes relatively low during 2017, but the economic challenges have definitely started to increase in recent months and are putting even more pressure on vulnerable businesses.
“The hurdles are likely to get higher going forward as companies deal with the instability surrounding Brexit, the introduction of the National Living Wage, the rollout of pension auto-enrolment to smaller businesses and a likely increase in interest rates.
“Business owners should monitor their finances carefully and plan for all eventualities. It is vital to remain alert to signs of trouble and be ready to adapt to the changing economic landscape.”
