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For help and advice contact Sheffield 0114 2859500 or Rotherham 01709 331300

Insolvency on the increase as Brexit worries continue to shake confidence

Latest Government statistics have revealed that the number of companies going bust and people becoming insolvent is once again on the increase.

And insolvency expert Paul Moorhead, of leading Sheffield insolvency and recovery practice Graywoods, says the figures reflect continuing economic uncertainty in the wake of the Brexit vote.

A total of 3,633 companies entered insolvency between July and September, which was 2.2 per cent higher than the previous quarter and 1.1 per cent higher than the same period in 2015.

The number of people who became insolvent in the same period was 24,251, a six per cent increase on the previous three months and 19 per cent higher than the same quarter last year.

“The increase in personal insolvencies was largely due to a rise in the number of Individual Voluntary Arrangements (IVAs), formal repayment plans designed to avoid the need for bankruptcy where some, or all, of the debt can be repaid over a number of years,” said Paul, adding that the number of IVAs had jumped by almost 30 per cent in the past 12 months.

“There has been a slight decrease in the number of people being declared bankrupt in the past 12 months,” he added.

“However there has been an increase in ‘debtor petitions’ where an individual chooses to enter bankruptcy, whilst the number of ‘creditor petitions’ has decreased.”

Paul explained that many people were still faced with a ‘debt overhang’ having accumulated high levels of debt in previous years and that, as the cost of living rises, that debt gradually becomes more unaffordable.

“Many business owners are concerned that we are entering uncharted waters as the UK prepares to leave the EU,” he said.

“The weakening pound has been a boost to exporters but is a cause for concern forcompanies that rely on imported goods and services.

“All of this adds to uncertainty and inevitably has a knock-on effect on business confidence.

“For firms that have been struggling for some time to survive, even a small change in the financial landscape can be the straw that breaks the camel’s back.

“We are seeing an increase in business owners approaching us for advice in situations where they need to plan ahead for potential problems.

“This gives far more scope for rescuing ailing businesses and the earlier plans are made, the higher the likelihood of a successful turnaround.”

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